GBPUSD influences shape the British pound’s review. For the second consecutive day,. GBPUSD gains momentum and rises deeper from a more than one-month bottom. Gains for the pound are limited because of expectations that the BoE will soon stop raising interest rates.
GBPUSD Fundamental Landscape
U.S. economic figures and Fed advice have been at the foreground of currency swings lately, which has been a common trend in FX markets. Similar to other major currencies, the pound has received some reprieve following last week’s big USD rise.
Jerome Powell, the chairman of the Federal Reserve, restated his message from the previous rate decision Tuesday. Citing disinflation once more, but he also hinted at the necessity for additional interest rate increases for a robust market.
He deftly chose not to answer when questioned about the likelihood of returning to a 50bps increment in the following meeting in order to avoid causing far too much market volatility.
In his statement yesterday, the Fed’s Kashkari reaffirmed similar hawkish views and noted that a tightening labor market will make it difficult to ease the pressures of inflation.
GBPUSD in UK Perspective
From a UK standpoint, the government is still concerned about protest activity, and on March 15 there are plans for another walkout by public servants. On the exact same day, Chancellor of the Exchequer Jeremy Hunt will present his economic plan. He will face further pressure to reconsider pay settlement issues. Essentially, the strike action disrupts the UK economy and casts doubt on UK governance, which is bad news for the pound.
The BoE’s present rate trend is expected to come to an end soon, which limits gains for the pound sterling.
On Wednesday, the GBPUSD pair builds upon the overnight recovery from support near the 200-day SMA and adds additional carry momentum. Early in the European period, spot prices rise to a new weekly top. Bulls are now trying to maintain the pace above the 1.2100 round-figure level.
US dollar in some selling pressure
A crucial factor operating as a tailwind for the GBPUSD cross is a little decline in US Treasury bond yields, which results in some renewed selling pressure on the US dollar.
On Tuesday, Fed Chair Jerome Powell reaffirmed that now the cycle of disinflation was already in way while failing to make any new hardline comments.
Something in turn fuels optimism that interest rates won’t rise significantly more, which in turn weighs on US bond yields and weakens the US dollar.
Global Scenario for British Pound
Nevertheless, a generally lower risk tone helps to contain losses for the safe-haven dollar. And, at least temporarily, restrains further gains for the GBPUSD pair. Concerns about economic uncertainty brought on by the ongoing rise in lending costs.
The most recent COVID-19 epidemic in China, and the ongoing Russia-Ukraine war have left the market sentiment vulnerable. In addition, worries over the deterioration of US-China ties limit traders’ desire for assets that are seen as being riskier.
BOE Stance in View
The GBPUSD pair is also capped as a result of a dovish evaluation of the Bank of England (BoE) action the other week. The sentence suggesting the UK central bank will “view the situation strongly, as required” was actually deleted.
In addition, BoE Governor Andrew Bailey predicted that in the second half of 2023, inflation would decline faster. This leads to suspicion that perhaps the rate-hiking trend may be approaching its conclusion and may prevent bulls from making risky wagers.
No Key Economic Reports Today
The GBPUSD cross is at the disposal of the USD price fluctuations on Wednesday because neither the UK nor the US are expected to reveal any significant market-moving economic statistics.
As a result, speculators now anticipate the statements of key FOMC participants. This could spur growth for the USD and give the GBPUSD duo some momentum.
Along with the US bond yields and the general risk attitude. The BoE’s Monetary Policy Report Hearings on Thursday will then come into focus.
GBPUSD Technical Picture and Levels to Watch
The psychological level of 1.2000 has just been crossed on the daily GBPUSD graph. It appears that the 1.2100 resistance level is being tested. There is no real obvious lateral skew at this time, which is wedged between both the 50-day and 200-day SMAs, accordingly. Depending on Fed talk,
Sterling could easily revert to trading below the 200-day SMA, but before that happens. We would be seeking for a daily candle to close just below 1.2000 support line.
The duo seems to be inching closer to the 50-point median on the Relative Strength Index (RSI), but bearish sentiment is still supporting the pair, providing room for the further pound depreciation.
