GBP/USD turns sideways around 1.0800, focus shifts to US/UK GDP data
- GBP/USD is expected to resume its upside journey after concluding its correction to near 1.0800.
- To revive UK’s financial stability, the BOE announced a bond-buying program worth GBP 65 billion.
- Does BOE really not have the stomach to fight inflation while simultaneously keeping financial stability?
The GBP/USD pair is displaying a lackluster performance in the Tokyo session. The asset has turned sideways in a narrow range of 1.0782-1.0800 after dropping from the critical hurdle of 1.0900. A failed attempt of overstepping the barricades at 1.0900 brought a correction in the cable, however, a bullish impulsive move after the conclusion of a pullback cannot be ruled out.
The surprise move of the bond-purchase program by the Bank of England (BOE) to bring stability to the financial markets has started displaying its consequences. It is worth mentioning that risk-sensitive currencies are performing now as the US dollar index (DXY) has recorded an intermittent top of around 115.00. However, the sterling gains are poor in comparison with other currencies.
The BOJ will purchase GBP five billion worth of long-dated bonds consecutively for 13 days to safeguard the economy from the financial turmoil. In times, when households in the UK are facing the headwinds of higher price pressures and BOE policymakers are already putting their blood and sweat to tame inflation, sheer liquidity infusion could offset a significant impact.
Does it state that the BOE really does not have the stomach to fight inflation while simultaneously keeping financial markets stable? Well, it will be consequences of minting more money which will display the capacity later.
On the economic data front, Friday’s Gross Domestic Product (GDP) data will be keenly watched. The annual and quarterly data is expected to remain steady at 2.9% and -0.1% respectively.
Meanwhile, the DXY is expected to remain sideways further as investors are awaiting the release of the US GDP data. As per the market consensus, the annualized US GDP will continue its de-growth pattern for this quarter by 0.6%.