GBP/USD sellers attack 1.0800 with eyes on BOE speakers, US GDP

• GBP/USD pares BOE-led gains, the biggest in 3.5 months.
• Jump in UK vehicle production, fresh run-up in yields challenge BOE’s capacity to restore market confidence.
• Fears over the European energy crisis, hawkish Fedspeak add strength to the pullback moves.
• Multiple central bank speakers are up for speeches, final readings of US GDP could also help sellers.

GBP/USD takes offers to refresh the intraday low around 1.0800, snapping a two-day rebound from the record low. In doing so, the cable pair consolidates the biggest daily gains since mid-June during Thursday’s Asian session.

Recovery in the US Treasury bond yields joins the market’s discomfort in the Bank of England’s (BOE) confidence to revive the British Pound (GBP) strength to weigh on the GBP/USD prices of late. On the same line could be the prevailing energy crisis in Europe and current pessimism in China.

Recently, the UK’s car production rose for the fourth straight month in August as per the data from the Society of Motor Manufacturers and Traders (SMMT), shared via Reuters. That said, the details suggest that almost seven in 10 SMMT members have expressed fears about future business operations.

Elsewhere, the People’s Bank of China (PBOC) is another central bank, in addition to the Bank of Japan (BOJ) and the BOE, to defend the domestic currency, namely the yuan. It’s worth noting that the PBOC has recently intervened multiple times in the market and is likely to do so today as well as to defend the yuan amid fears of economic slowdown, led by the covid-led lockdowns.

It should be noted that the British government’s rejection to fire the UK Chancellor Kwasi Kwarteng and keep his recently criticized fiscal plan in place also challenge the GBP/USD traders.

On Wednesday, the Bank of England (BOE) announced a bond-buying program to defend the British Pound (GBP) on Wednesday. The details suggest that the BOE will buy bonds with a maturity of over 20 years and up to 5 billion sterling worth per auction initially. That said, the BOE will start buying on September 28, which in turn suggests they postponed the pre-established mechanism of selling the bonds until October 31. BOE later confirmed that it could buy just £1.025 billion in the emergency QE operation, well below the planned £5 billion. 

On the other hand, the US international trade deficit narrowed by $2.9 billion to $87.3 billion in August from $90.2 billion in July. Details suggest that the Exports dropped for the first time since January while Imports marked the fifth consecutive monthly decline. Further, Atlanta Fed President Raphael Bostic said on Wednesday that the baseline scenario right now includes a 75 basis points (bps) rate hike in November and a 50 bps increase in December, as reported by Reuters. Additionally, Chicago Federal Reserve President Charles Evans also emphasized the need to address inflation and tried to renew the US dollar buying but could not due to the softer yields.

Looking forward, multiple BOE speakers are on the line and so do the final readings of the US Q2 Gross Domestic Product (GDP), expected to confirm -0.6% annualized figure. Considering the same, the GBP/USD may witness further downside if the US data prints upbeat figures and the BOE policymakers hesitate in convincing markets.

Technical analysis

GBP/USD remains bearish unless providing a clear upside break of 1.0730-35 resistance confluence, including the 10-DMA and a 12-day-old descending trend line.