Ella 
GBP/USD extended its retreat from the 1.2800 mark hit earlier in the week, remaining under some selling pressure for the fourth day in a row on Friday. GBP/USD fell to a more than two-month low near 1.2585 in Asia, confirming the overnight break below the 100-day simple moving average (SMA), a technically key level, for the first time since March 2023 .
Rising bets on the Bank of England (BOE) cutting peak interest rates have weighed on the pound, coupled with a bullish dollar (USD), continuing to put some downward pressure on GBP/USD. Weak U.K. purchasing managers’ indexes (PMIs) on Wednesday revived fears of an imminent U.K. recession and convinced market participants that the Bank of England would not need to raise interest rates as previously thought to bring inflation back down to target level. In fact, money markets are currently pricing in little chance of further rate hikes after the Bank of England’s expected 25 basis point hike in September.
On the other hand, the dollar rose to its highest level since June 7, with overnight hawkish comments from Federal Reserve (FED) policymakers still providing strong support for the greenback. Indeed, Boston Fed President Susan Collins said the central bank is likely to keep rates steady, but noted that more rate hikes are likely and that it is too early to signal a rate cut. Elsewhere, Philadelphia Fed President Patrick Harker said the central bank must maintain its restrictive stance, adding that inflation would need to come down further to pave the way for rate cuts.
This thus opens the door for another 25 basis points of rate hikes by the Fed before the end of the year, keeping U.S. Treasury yields higher and continuing to support the dollar. Adding to this, some technical selling below the 100-day moving average in GBP/USD also added to GBP/USD’s decline and supported the outlook for further depreciation in the near term. However, Federal Reserve Chairman Jerome Powell will speak later on Friday at a Jackson Hole symposium and Bank of England Governor Andrew Bailey will speak on Monday. Traders are likely to refrain from making aggressive bets ahead of a speech on Saturday.
