GBP/USD losing its appeal, while Gold gets Shine back due to Taiwan tensions

GBP/USD Heading South as Taiwan Fear’s Awakes the Bears

GBP/USD is hovering around the 1.22 level, having looked set to test 1.23 as investors change their appetite from risk-on to risk-off.  

With the US GDP being announced at -0.9% – indicating the US is in a technical recession – the cable along with many other major currencies has been enjoying USD weakness due the market anticipating that the Fed will not be so aggressive with their future interest rate hikes. 

Rising US-China tensions over Taiwan has changed its current fortune.

US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan today has stoked political tension between the world’s two biggest economic superpowers, with China taking Pelosi’s visit as a threat to its sovereignty claim over Taiwan. It has since threatened military action.

Also weighing heavy on the minds of GBP traders is the upcoming Bank of England Interest Rate Decision due on Thursday at 11am (UTC).  Market expectation is for the BOE to raise rates by 50 basis points to 1.75%. Andrew Bailey, Bank of England Governor, said in late July that that 50 bps would be on the table at the next meeting, but “a 50bps hike is not locked in, and anyone who predicts that is doing so based on their view”.  

With UK inflation over a 40-year high at 9.4% and clear signs of economic slowdown in the UK, the BOE is indeed in a rock and a hard place.

tixee’s Global Head of Market Research, James Trescothick, will be holding a “tixee Live WatchAlong ” on the Bank of England interest rate decision at 11am(UTC), available live via YouTube and Facebook.

BOE Interest Rate (Thursday)              Expectation: 1.75%           Previous:1.25%


Key Areas of Interest:

A potential key support for the GBP/USD is around the 1.21975 level, which shows evidence of a previous resistance and signs of buying. A potential resistance is around 1.22472, which is the 50 sma on a 30 minute chart.

Gold getting its Safe Haven Shine Back?

Gold remains favored to move on the upside due to the escalation of US-China tensions with US House of Representatives Speaker Pelosi’s expected visit to Taipei today.  Gold bulls have their sight set on a key potential resistance of $1786 per ounce, with a clear break of area of interest opening up a route to $1800 mark. 

The yellow metal’s appeal to investors is holding, as it’s often the preferred store of value during times of potential military conflict.  With the lack of key US economic data today, the market will focus on further developments in the Taiwan tension.  Recession concerns are also boosting the metal, so the labor market will come under scrutiny this week with the US Non-Farm Payroll due on Friday at 12:30pm (UTC).

US Non-Farm Payroll(Friday)                  Expectation:250K              Previous: 381K  

Key Areas of Interest:

There is currently a potential support level at around $1771, which is the 50 sma on a 30 minute chart and the Fibonacci level of 23.6% on a daily chart. Key resistance remains at $1786 per ounce. 

Written by James Trescothick, Global Head of Market Research

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