Cable tanks amid British capital flight and a strong NFP

Most of the time, one would expect rising yields from bonds to boost a currency: British 30-year gilts currently yield nearly 5.5% – a high of more than 25 years. That the pound has continued to decline despite this suggests flight of capital from the UK. High government borrowing and general fiscal instability in the UK are causing concern among many traders. Meanwhile the dollar is likely to remain strong after a good job report and a high probability of American inflation continuing to rise, prompting the Fed to cut rates more slowly.

Cable has made two clear new lows in 2025 so far but it’s questionable whether the current momentum can continue for long. August’s low of around $1.205 is likely to be tested again within the next few weeks but whether there might be a bounce before that depends on inflation data, due from both countries on Wednesday 15 January.

The scale of the recent downward movement might suggest an aggressive reaction once momentum starts to decline significantly. The initial target for short-term buyers would probably be the 38.2% monthly Fibonacci retracement around $1.233; after that, $1.25 would be possible if momentum continued. $1.22 doesn’t look like an important support on the weekly chart but selling in here with the downtrend mature might be more risky than waiting for a retracement upward or consolidation.

This is my personal opinion which does not represent the opinion of Exness. This is not a recommendation to trade.