Home Daily Commentaries GBP/USD remains under pressure

GBP/USD remains under pressure

Daily Currency Update

The pound continued to fall against the US dollar yesterday due to growing expectations that the US Federal Reserve could raise interest rates by 1% at its next meeting. Some traders have ramped up expectations that the Federal Reserve would go for an aggressive tightening at their July 26-27 meeting after data on Wednesday showed consumer price inflation increased at the fastest pace in four decades.

The GBP/USD pair fell to 1.1759, its lowest since March 2020. Political uncertainty in the UK also played a big part in its decline after Prime Minister, Boris Johnson, announced his resignation and the conservative party began an election process, which is weighing heavy on the pound.

Key Movers

The Eurozone is struggling with a worsening energy crisis as Russia shut down a gas pipeline for regular week-long maintenance, leaving markets jittery about whether it will come back online, with Russia saying it will depend on demand and sanctions.

The EUR/USD pair plunged to 0.9951 yesterday but finished the day at around 1.0020. Uncertainty in Europe added to euro weakness. Gazprom, the Russian energy giant, said that it would not guarantee to resume the functioning of the Nord Stream 1 pipeline after it was shut down for repairs.

Despite the uncertainty, the European Central Bank is likely to stick to the 25 basis point interest rate increase it has flagged for next week, but the outlook trails well behind the Fed’s potential interest rate increase, supporting the US dollar’s strength versus the euro.

Expected Ranges

  • GBP/USD: 1.1805 - 1.1905 ▲
  • GBP/EUR: 1.1775 - 1.1845 ▲
  • EUR/USD: 0.9985 - 1.0085 ▲