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GBP/USD leans bearish towards 1.1680 as it drops to the fresh low since March 2020, extending Friday’s downside momentum, despite bullish options market signals.
That said, the one-month risk reversal (RR) for the GBP/USD, a difference between the call options and the put options, printed a four-day uptrend by the end of Friday, to 0.025 at the latest. In doing so, the RR figure also reverses the previous weekly print of -0.480 with the 0.295 positive numbers.
It’s worth noting that the bearish bias should have taken clues from the recently hawkish Fedspeak and economic fears surrounding the UK, especially amid political indecision.
“Restoring price stability will take some time, require using central bank’s tools ‘forcefully’,” said Fed Chairman Jerome Powell during his much-awaited Jackson Hole speech on Friday. The policymaker also stated that restoring price stability will likely require maintaining a restrictive policy stance for ‘some time’.
On a different page, Goldman Sachs sees the UK entering into recession in the fourth quarter (Q4) of 2022 while cutting the 2022 Gross Domestic Product (GDP) forecast to 3.5% from 3.7%. The US bank also mentions in its latest analytics that the recession is to be ‘relatively mild’.