GBP/USD: Five factors to continue pushing the cable lower

GBP/USD has dropped to the lowest since January amid higher US yields. Yohay Elam, an Analyst at FXStreet, lays out five reasons for the pound's plunge and explains why there is no end in sight.

Higher US yields

“It took markets a few days to react, but the Federal Reserve's signal of tapering its bond-buying scheme has triggered a sell-off in bonds. The result is higher returns on American debt, pushing the dollar higher.” 

No fuel today

“The British army is on standby to deliver petrol to stations as a shortage of lorry drivers keeps some pumps dry. Transport issues could derail the economy. It will take a few more days to resolve the issue.”

Brexit

“The UK and France are fighting over fish once again. While fishing is a minuscule sector, tensions around it contribute to lack of progress around the Northern Irish protocol. It is also essential to note that the lack of lorry drivers is also Brexit-related. Things will likely get worse before improving.” 

US default? 

“October 18 is the date that the US would hit its debt limit and could potentially miss payments to bondholders. While such a move has little chances, the ongoing row between Democrats and Republicans in Congress is worrying markets.”

Still not oversold

“The Relative Strength Index on the four-hour chart is still above 20, thus outside levels that proved to trigger a bounce in the past. Pound/dollar continues trading below the 50, 100 and 200 Simple Moving Averages and suffers from downside momentum.”

See – GBP/USD to plummet towards key support at 1.33 – SocGen