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Forex Market: GBP/USD remains mostly stable despite FX market jitters over Turkey, speculators reduce GBP/USD longs

Having touched a one-week low in Asia, GBP/USD remained mostly stable during Monday’s European session, as Forex market jitters resulting from Turkey’s surprise decision had insignificant effect on the Sterling.

Meanwhile, the latest CFTC data showed that speculators had cut their net long position on GBP/USD during the week to March 16th, but still, the market remained overall bullish on the British currency.

The pace of vaccine roll-out in the UK kept market analysts optimistic about the country reopening from lockdown, unlike most of continental Europe.

“It may be hard for GBP to make much headway against the USD as Europe battles with the third wave of the virus, yet EUR/GBP may continue to press support at 0.8540,” ING strategists pointed out in an investor note.

Against a basket of six major peers, the US Dollar was holding gains on Monday, as concerns that events in Turkey may disrupt other financial markets spurred risk aversion. Turkish President Tayyip Erdogan fired the governor of the nation’s central bank just two days after a decision to raise interest rates sharply in order to head off inflation of almost 16%. There are opinions that the newly appointed governor will probably reverse the bank’s hawkish measures against inflation, which may prolong market volatility.

“Other emerging market countries are not in the same position as Turkey, but there still could be some contagion,” Masafumi Yamamoto, chief currency strategist at Mizuho Securities, was quoted as saying by Reuters.

“There are concerns that people will start taking profits in other markets. This looks like a time to re-think your investment strategy, because the rotation into higher-yielding emerging market currencies will be put on hold.”

As of 10:18 GMT on Monday GBP/USD was inching up 0.02% to trade at 1.3862, after earlier touching an intraday low of 1.3818, or its weakest level since March 16th (1.3809). The major pair has edged down 0.43% so far in March, following a 1.71% gain in February.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 5.8 basis points (0.058%) as of 9:15 GMT on Monday, or unchanged compared to March 19th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3883
R1 – 1.3935
R2 – 1.4012
R3 – 1.4064
R4 – 1.4117

S1 – 1.3806
S2 – 1.3754
S3 – 1.3677
S4 – 1.3601

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