- GBP/USD recovers a few pips from its lowest level since 1985.
- An intraday pullback in US bond yields caps dollar gains and offers support for the pair.
- The rebound attempt lacks bullish conviction ahead of the expected FOMC decision.
The GBP/USD pair found some support near the 1.1300 area and recovered a few points from its lowest level since 1985, touched earlier this Wednesday. However, the pair remains in the red for the second day in a row and is currently trading just below 1.1350, down around 0.30% on the day.
A combination of factors help keep the US dollar firm, which, in turn, puts downward pressure on GBP/USD. The expectation that the fed rise another 75 basis points at the end of the two-day monetary policy meeting on Wednesday continues to act as a tailwind for the dollar. In addition, the risk of a new escalation in the conflict between Russia and Ukraine offers additional support to the dollar due to its refuge nature.
the russian president Vladimir Putin announced a partial military mobilization. This comes amid growing recession fears and dampens investors’ appetite for riskier assets, reflected in the cautious mood prevailing in equity markets. The British pound is further pressured by the gloomy prospects for the British economy. This further casts a shadow over the prospects for a 50 basis point rate hike by the Bank of England, due to be announced on Thursday.
The context leads to a modest setback in the US Treasury bond yields, which, in turn, deters dollar bulls from making further bets. In addition, the United Kingdom presented a package of measures to help companies, limiting the cost of electricity and gas. The combination of factors helps ease the downward pressure around GBP/USD, although any meaningful recovery still looks elusive as the spotlight remains on the Fed.
The US central bank is scheduled to announce its policy decision later in the US session. Investors will take as reference the updated economic projections, the so-called “dot plot” and the comments of the chairman of the Fed, Jerome Powell, at the press conference after the meeting. This will be followed by the BoE meeting on Thursday, which will play a key role on the pound and help determine the next leg of a directional move for the pair.
Technical levels
Source: Fx Street
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