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Forex: US slowdown destabilises markets

Yesterday’s US GDP data confirmed the divergence between the UK and US, which has now been building for some months and we saw GBPUSD crescendo higher. It is now not far from recording a new 2015 high, but we are still some way off the 200 day moving average, which sits around the 1.5700 level, so the jury is still out as to whether this sharp move to the upside in the past few weeks is a reversal of the downward trend that commenced last July.

Naturally there was also some risk taken off the table with stock indices tumbling and this comes as a little warning sign for investors who would normally expect markets to rally after a poor piece if economic data from the US, as it would be seen as a sign that monetary policy would remain looser for longer. Not so this time as the reality is starting to set in that the global economy is not as strong as it was six months or even a year ago and it’s little wonder the Federal Reserve has been becoming more cautious in their outlook for the US economy, giving more gloomy prospects at last night’s FOMC.

3.25/5(4)