The pound has surrendered to Fed -led dollar strength GBP GBPUSD $GBP $GBPUSD
This week in GBP/USD: Powell shows a hawkish side
On the economy, Powell said that there is "quite a bit of room to raise rates without hurting employment" and stressed that sustaining a long economic expansion means price stability. That is different than the previous focus on employment. suffered mostly before the Fed, the dollar's surge came in response to the Fed's aggressive stance on inflation. GBP/USD dropped below 1.34 in a long response to the event.
In the UK, the focus remained on politics. At the time of writing, Prime Minister Boris Johnson has weathered calls on him to resign and also a police investigation – on top of an inquiry made by a civil servant. The fascinating political drama had a negative, yet limited impact on sterling. On both sides of the Atlantic, COVID-19 cases have dropped from the highs, providing hope that the worst of the pandemic belongs to the past. That allowed GBP/USD to move to the tune of other events, most notably the Fed, as mentioned above. If PM Johnson is forced out, it would probably weigh on sterling in the short run, but the prospects of seeing Chancellor Rishi Sunak at No. 10 – or even less moderate Conservatives – would be comforting to markets.
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