GBPUSD plunged to a fresh 2-year low below 1.20 as the U.S. 10 Year Treasury yield jumped to 3.43% and majority of investors expect that Fed will increase interest rates by 75 bp on Wednesday. Meanwhile UK jobs data was solid. The unemployment rate ticked higher but remained below pre-pandemic levels, however real pay in April fell at record pace due to surging inflation. Also the economy contracted for a second month in April and many analysts fear that high energy costs and weak growth throughout Europe may speed up this process in the upcoming months, which may be negative for the British pound. On Thursday BoE is expected to lift borrowing costs for a 5th time by 25 bps to 1.25%, the highest since early 2009 in order to avoid a recession scenario. Should the central bank surprise the markets and raise rates above the market consensus, then it may lead to an appreciation of the pound.
GBPUSD broke below major support at 1.20. If sellers manage to maintain current momentum, downward move may accelerate towards 1.14 level where pandemic lows are located. Source: xStation5
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