GBP/USD Falls Hard As Geopolitical Tensions, Fed Meeting Expectations Pressurize Risky Currencies

The British Pound fell hard on Monday to 18-day lows after the market’s flight to safety hurt risky currencies. Expectations of tightening by the Fed and geopolitical tensions spurred demand for the safe-haven dollar, as did a rise in US bond yields.

Ahead of Wednesday’s Fed meeting, there is a wide expectation that the Fed may embark on an aggressive tightening curve which could feature up to four interest rate hikes. However, even as March was the expected start time for lift-off, the Fed could deliver as soon as Wednesday. A drop in UK business activity as showcased by the PMI drop to 11-month lows on Monday also put pressure on the cable. 

The GBP/USD was down 0.64% on Monday as of writing, marking a third consecutive day of decline. 

GBP/USD Outlook

The decline of the day violated the 1.34954 support. A 3% penetration close below this level gives the bears the confirmation needed to chase a deeper target at 1.33683. There is a potential pitstop at 1.34138 (29 September/29 December 2021 lows).

On the other hand, recovery of the pair requires a break of 1.37298 (14 January high). This opens the door towards 1.39012, with 1.38330 (cluster of highs of 19-26 October 2021) serving as an intervening resistance barrier.

GBP/USD: Daily Chart

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