External Factors Will Drive GBP/USD, GBP/JPY

GBP/USD and GBP/JPY Analysis and Charts

After testing 1.2800 earlier in the week, cable is pressing down on a prior level of support around the 1.2550 level, and with little in the way of any economic data next week to help stem the sell-off, sub-1.25s levels are looking increasingly likely.

Fed chair Powell’s speech at the Jackson Hole Symposium earlier was fairly neutral overall, unlike last year’s hawkish message, but markets are giving the US dollar a small boost going into the weekend. Chair Powell said that ‘price stability remained essential’ but added that the Fed would proceed carefully when deciding if they needed to tighten further.

US Dollar (DXY) Undecided After Chair Powell’s Speech Gives Little Away

Earlier this week the latest round of global PMIs showed a range of G7 economies struggling, and the UK was not exempt from the bad news. The growing view now is that the Bank of England may need to temper future rate hikes to allow the economy room to grow, despite inflation remaining well above the central bank’s target.

British Pound (GBP) Update: Sterling Damaged by Feeble UK PMIs

The UK data calendar is bare next week so any moves in GBP-pairs will come from the right-hand side. There is a lot of heavyweight US data on the slate next week with the latest look at inflation and the jobs market (NFPs) being the standout events.

For all market-moving economic data and events, see the DailyFX Calendar

Cable broke through a multi-week support level around the 1.2620 area yesterday and is struggling to make it back. The pair have just bounced off another level of horizontal support just below 1.2550 and this may come under pressure again in the coming days. While the CCI indicator shows GBP/USD as heavily oversold, the break below both the 20- and 50-day simple moving averages is helping to perpetuate the sell-off. Below here, 1.2447 is the next target.

GBP/USD Daily Price Chart August 25, 2023

See How GBP/USD Traders are Positioned

GBP/JPY is not getting sold off as aggressively as cable. The Bank of Japan continues to keep monetary policy excessively loose and accommodative, despite the Yen nearing multi-year lows against a range of currencies. The small sell-off in GBP/JPY is likely to be contained, helped by both the 20- and 50-day simple moving averages, while the CCI indicator shows the pair neither overbought nor oversold. This pair’s future will be decided by the Bank of Japan.

GBP/JPY Daily Price Chart – August 25, 2023

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