The GBPUSD pair struggles to capitalize on its minor intraday increase and trades with a negative bias during the first part of Tuesday’s European session.
The pair is now trading just above the mid-1.2100s, down more than 0.15% for the day, and appears to have ended a four-day gaining streak to a one-month high, around the 1.2200 level set on Monday. With the announcement of the UK monthly employment figures, which reiterated expectations on more rate rises by the Bank of England (BoE) later this month, the British Pound gained a modest boost.
A little increase in US government rates boosts Dollar demand ahead of the US CPI report.
US Dollar (USD) demand, aided by a little increase in US Treasury bond rates, appears to be a crucial driver driving the GBPUSD. pair to give up some of the previous day’s gains.
The Federal Reserve tried to reduce the damage from Silicon Valley Bank’s (SVB) abrupt failure, announcing on Sunday that it will make additional funds available to qualifying depository institutions to assist ensure banks have the capacity to satisfy the demands of all their depositors. This, in turn, alleviates concerns about a deeper systemic problem and is expected to push US bond rates higher across the board. The big intraday USD rise might also be attributable to some trade repositioning ahead of the critical US consumer inflation statistics, which are coming later in the early North American session. Yet, amid anticipation that the Fed may delay, if not stop, its rate-hiking cycle.
The pressure on the US financial sector may limit the USD’s upward potential and give some support to the GBPUSD pair. Traders may also avoid from taking aggressive bets and choose to remain on the sidelines ahead of the significant central bank event risks, which are the FOMC decision on Wednesday and the BoE meeting next week. This makes it even more advisable to wait for substantial follow-through purchasing before concluding that the GBPUSD pair’s current rebound from the 1.1800 level, or the YTD low reached last week, has completed.
