GBPUSD plunges to fresh all-time lows at 1.0359 during Asian trading marking the biggest one-day fall and extending the previous week’s slide. As of writing GBPUSD trades at 1.0548 the lowest level since February 1985.
The Pound slump came after the British Chancellor of the Exchequer Kwasi Kwarteng’s who has been at the office since September 6th announced plans to impose huge tax cuts while boosting spending paid by increases in borrowing up to 72 billion pounds.
The Bank of England raised interest rates by 50 basis points last week following the Fed and Swiss National Bank in the fight against rising inflation.
From a technical perspective, the pound panic started after GBPUSD broke below 1.14 the coronavirus era lows. The slide accelerated as stop losses hit at 1.12 while the move below 1.10 created panic selling which accelerated in a volume-thin Asia session today. As volatility skyrockets in the pair, a test at the parity level can’t be ruled out given the USD strength.
Is it Time for BOE Intervention?
Traders now wait for an intervention by the Bank of England. The question is if the intervention would be just verbal or the central bank would proceed with an emergency rate hike. Last week Bank of Japan intervened in the markets to stop the Yen free fall against the US dollar.
An intervention might send the GBPUSD above 1.0848 the daily high which will offer a short breath for the bulls. Strong resistance for the pair stands at 1.1274 the Friday’s high, while more sellers await at 1.1385 the top from September 21. High volatility and deeply oversold levels might provide a bounce, but the critical question is if the rebound would be sustainable.
In equities markets, Asian indices are trading mostly lower. Nikkei 225 is down 2.47% and Sensex is down 1.61%. US futures are pointing to a negative start. S&P 500 futures trading 0.86% lower at 3,662, Nasdaq is 0.98% lower at 12,178 and Dow Jones is 0.67% lower at 29,383.
In forex markets the US dollar index (DXY) adding 0.87% at 113.80. EURUSD started the week 0.63% lower at 0.9628 while USDJPY is 0.61% higher at 144.16.
Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently, Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).