The British Pound (GBP) surged on Monday, October 23, 2023, as traders reacted to growing fears regarding the independence of the US Federal Reserve (Fed), leading to a significant sell-off of the US Dollar (USD). The GBP/USD currency pair rose 0.55% to trade at 1.3473, reflecting increased risk aversion among investors.
Concerns about the Fed’s autonomy intensified following remarks made by Fed Chair Jerome Powell. In a statement and accompanying video over the weekend, Powell revealed that the Fed had received grand jury subpoenas from the Justice Department, which he described as a direct threat to the central bank’s independence. He articulated that these actions should be viewed in the context of ongoing political pressures, stating, “the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
As a result of these developments, the US Dollar Index (DXY), which gauges the dollar’s performance against a basket of six major currencies, declined by 0.35%, settling at 98.79. This decline marks a notable shift in sentiment, as the “Sell America” trend returned to focus, prompting traders to pivot towards other G10 currencies.
While US President Donald Trump denied any knowledge of the investigation into the central bank, he has previously criticized Powell for not reducing interest rates as he had anticipated. The ongoing political dynamics in the United States have thus created a turbulent environment for the dollar.
UK economic data, including the upcoming Gross Domestic Product (GDP) figures scheduled for release on October 26 and employment statistics the following week, are now under scrutiny. Analysts suggest these figures could provide vital insights into the future policy direction of the Bank of England.
Technical Analysis of GBP/USD
The GBP/USD pair is currently experiencing a bullish momentum, having reached a three-day high of 1.3485. The Relative Strength Index (RSI) indicates that the pair remains in positive territory. Should GBP/USD surpass the psychological level of 1.3500, it could pave the way for a test of the yearly high at 1.3567, with a potential target of 1.3600 thereafter. Conversely, a decline below 1.3400 may lead to a test of the 200-day Simple Moving Average (SMA) at 1.3386.
The performance of the British Pound against other major currencies this week has also been notable. Below is a summary of the percentage changes against selected currencies:
– USD: -0.42%
– EUR: 0.42%
– JPY: 0.14%
– CAD: 0.30%
– AUD: 0.56%
– NZD: 0.60%
– CHF: 0.60%
This week, the British Pound has emerged as the strongest performer against the US Dollar, reflecting a broader trend influenced by geopolitical factors and the Federal Reserve’s challenges.
As the situation develops, traders will be closely monitoring both US and UK economic indicators to inform their strategies and expectations regarding future currency movements.
