The pound against the U.S. dollar has ended four consecutive gains, and there is still huge room for decline

On Wednesday (October 6), the British pound suffered a massive sell-off against the U.S. dollar, ending the four consecutive days of rising momentum. A combination of factors pushed the dollar higher across the board and put pressure on it. Investors look forward to the US ADP report on private sector employment to provide new impetus.


The currency pair faced selling pressure again on Wednesday and ended its four-day rise to a weekly high of about 1.3650. The combination of a series of factors has helped the dollar gain strong follow-up traction, which is regarded as a key factor that exerts heavy pressure on the pound against the dollar.

The market expects that the Fed will begin to withdraw its stimulus measures during the large-scale epidemic as early as November. Market expectations continue to increase and the U.S. dollar will continue to gain support from them. Fearing that the continued surge in energy prices will trigger inflation, the market seems to have begun to digest the possibility of the Federal Reserve raising interest rates in 2022.

In addition, the Evergrande crisis and the deadlock in the US debt ceiling have triggered a new round of global safe-haven transactions. This, coupled with the strong rise in U.S. Treasury yields, continued to provide a boost to the safe-haven dollar and prompted a new round of selling in the pound to dollar exchange rate.

Britain and France are once again nervous about fishing rights after Brexit, which further drags down the pound. In the latest development, French Finance Minister Le Maire stated that France will formulate an action plan for the UK and fisheries on October 15. In addition, the continuing fuel crisis in the UK has further weakened the pound.

FXStreet analyst Yohay Elam believes that the key speech of British Prime Minister Johnson is unlikely to boost the pound, leaving room for a sharp decline in the pound.

British Prime Minister Johnson will deliver a keynote speech at the Conservative Party Conference later that day, describing the bright future of Britain after Brexit. He hopes that Britain can adapt to a long-term life without a large number of EU immigrants. In the short term, this means that there are no urgently needed truck drivers to refuel at the gas station. This energy crisis continues. "

Investors will pay attention to ADP employment data. The number of people employed in September is expected to be 425,000, which is higher than the 374,000 in August. This may also bring another boost to the US dollar-especially last month's ADP data correlated better with the official non-agricultural employment report. "

Support is at 1.3525, which was the support line earlier this week. It is closely followed by the previous week's cornerstone of 1.3435, and then the 2021 low of 1.34. "

"The resistance is at 1.3590, which was the resistance earlier this week, followed by the week's highest at 1.3650."

(The British pound against the U.S. dollar daily chart)

At 20:05 GMT+8, the British pound was quoted at 1.3578 against the US dollar.