GBP/USD Drops Below 1.1200 As BoE Prepares For A Long Recession

Key Insights

• BoE raised the rate to 3% and warned about a lengthy recession. 
• EUR/USD pulled back towards the 0.9750 level as traders remained focused on hawkish Fed. 
• USD/CAD moved away from session highs as WTI oil rebounded towards the $89 level. 

GBP/USD Retreats As BoE Highlights The Gloomy Outlook For The UK Economy

GBP/USD moved below the 1.1200 level after BoE raised the interest rate by 75 basis points. As a result, the rate was raised from 2.25% to 3%, in line with the analyst consensus.

Importantly, one member preferred to raise the rate by 50 bps, while another one wanted a small 25 bps increase. These dovish members put significant pressure on GBP/USD.

In addition, the bank noted that the economy would be “in recession for a prolonged period and CPI inflation would remain elevated at over 10% in the near term.” These comments served as an additional negative catalyst for GBP/USD.

U.S. Dollar Stays Strong As Treasury Yields Rise

U.S. Dollar Index pulled back from session highs after the release of the ISM Non-Manufacturing PMI report, which missed analyst expectations.

However, the U.S. dollar stays strong against a broad basket of currencies today as traders bet on an aggressive Fed. The yield of 2-year Treasuries tested new highs today, providing additional support to the American currency.

EUR/USD Tests Support At 0.9750

EUR/USD settled near the 0.9750 level as traders remained focused on the hawkish Fed.

In case EUR/USD manages to settle below the support at 0.9750, it will head towards the next support level at 0.9710. RSI remains in the moderate territory, so there is plenty of room to gain downside momentum in case the right catalysts emerge. If EUR/USD settles below 0.9710, it will move towards the support at 0.9675.

On the upside, the nearest resistance for EUR/USD is located at 0.9810. A move above 0.9810 will push EUR/USD towards the resistance at 0.9850. If EUR/USD gets above this level, it will move towards the next resistance at 0.9885.

AUD/USD Moved Below The 0.6300 Level

AUD/USD declined towards the 0.6300 amid a broad pullback in commodity markets, which was caused by the hawkish Fed. Meanwhile, NZD/USD managed to get below the support at 0.5775 and made an attempt to settle below the 0.5750 level.

USD/CAD tested the 1.3800 level but lost momentum and moved closer to the 1.3700 level. WTI oil rebounded towards the $89 level, providing support to the Canadian dollar.

USD/JPY Gains Ground Despite BoJ’s Efforts

USD/JPY continues its attempts to settle above the resistance at 148.50 as traders shrug off intervention risks.

It looks that the BoJ has provided some support to the yen in recent trading sessions, but the huge difference between the rates in the U.S. and Japan continues to put pressure on the Japanese currency.

If USD/JPY manages to settle above the 148.50 level, it will gain additional upside momentum and head towards the next resistance level at 148.85.

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