GBPUSD rises for the second day in a row, but with no follow-through.
The GBPUSD pair trades with a bullish bias for the second day in a row on Tuesday. Reaching a three-day high at 1.2770 during the Asian session. Spot prices, on the other hand, have been contained in a similar trading range for the previous three weeks or more. This calls for some caution before expecting a continuation of the current rally from a one-and-a-half-month low in the 1.3615 level. Which also marks the 100-day Simple Moving Average (SMA) support.
Bets on the BoE tightening further bolster the GBPUSD and provide some support to the major.
The Bank of England (BoE) will raise interest rates further. Supporting the British Pound (GBP) and acting as a tailwind for the GBPUSD pair. In fact, current market pricing implies a more than 80% possibility of a 25 basis point. Increase at the next Bank of England meeting in September.The fact that salaries in the UK reached a new record growth rate in the second quarter. Added to concerns about long-term inflation despite 14 straight rate rises.
Furthermore, the positive UK GDP figure and slightly higher UK CPI print increase the probability of future BoE policy tightening.
Hawkish Fed predictions operate as a headwind for the USD, perhaps limiting any major advances.
The US Dollar (USD) is hovering slightly below its best level. In more than two months, which was reached last week.
That, for the time being, prevents bulls from putting aggressive wagers on the GBPUSD pair. Rising expectations that the Federal Reserve (Fed) would maintain its hawkish posture and keep interest rates higher for a longer period of time support increased US Treasury bond yields. Aside from that, a generally lower risk tone is considered. As another reason supporting the safe-haven Greenback. Concerns about China’s deteriorating economic situation continue to weigh on market mood.
Investors may also want to stay on the sidelines ahead of the Jackson Hole Symposium later this week, where central bankers’ statements may instill major volatility in the markets and offer a fresh push to the GBPUSD pair.
On Wednesday, the UK and US PMIs will be released, providing clues about the economy’s health. And whether the respective central banks can afford to raise interest rates further. Meanwhile,GBPUSD traders will be watching the US economic calendar on Tuesday. Which includes the publication of Existing Home Sales and the Richmond Manufacturing Index.
