The Market Mood and Brexit
The pair of the British Pound Sterling and the US Dollar have renewed intraday low points at close to 1.2300. It has effectively erased the recovery of the previous day from a low point of two years in the course of the Asian session on Monday. The most recent weakness of the cable pair could be linked to the general risk-off market mood and unfavorable news from Brexit negotiations.
GBP/USD price chart. Source TradingView
Another factor that could be weighing heavily on the pair might be the fears surrounding the publication of the United Kingdom’s Q1 Gross Domestic Product figures this week. Starting off with risk indicators, more than a 1.0% drop in the S&P 500 Futures has combined with a high of three years of the ten-year US Treasury yield to reveal the distasteful market sentiments.
In the process of checking up on the moves, the risk associated with firmer monetary policies and the COVID situation in China has gained significant attention. Another event drawing much attention is the new sanction imposed on Russia by Western countries.
Northern Ireland Elections
The victory of Sinn Fein in the elections in Northern Ireland would be posing some challenges to the ongoing plans for Brexit. This factor equally weighs heavily on the GBP/USD currency pair.
It is getting clearer to market players that there might be faster and heavier interest rate increases as they expect the US inflation report this week. The reason for it might be connected to the lack of more favorable jobs data for the US last week. Also, it could be attributed to the dominantly hawkish statement from top officials of the Federal Reserve.
The Non-farm Payroll revealed that an additional 428,000 jobs were added by the private sector. It surpassed the forecast that was predicted for it at 391,000, as well as the March figure. The unemployment figures, however, remained the same at 3.6%.
After the publication of the report, the President of Minneapolis Federal Reserve and member of the Federal Open market Committee, Neel Kashkari, took to Medium to make a statement. He said that since the greatest influence on credit demands comes from long-term rates, then financial situations will be back to neutral territory soon.
He said further that his view of the neutral interest rates remains at 2.0%.
It should be noted that the St. Louis Federal Reserve President, James Bullard, confirmed his bullish stance and nudged the Federal Reserve in the direction of a 3.5% interest rate. Meanwhile, G7 nations have imposed more sanctions on Russian oil and services.
It is said that risk catalysts might keep the GBP/USD pair under pressure in the face of a stronger US Dollar. Nevertheless, the preliminary GDP for the first quarter coming from the UK on Thursday is going to be of huge significance as there are fears of economic stagnant inflation.