GBP/USD bulls move as USD pulls away from key resistance

• GBP/USD bulls come out for air on a softer US dollar in NY.
• The focus of the week is on the Fed and the Bank of England.

The GBP/USD trades sideways again on the day as bulls move from 1.1355 lows and retake 1.14 zone. The USD is slightly weaker in the US session in some back-and-forth trading as traders continue to await the Federal Reserve and Bank of England meetings this week.

Sentiment surrounding rising inflation and monetary policy tightening remains in command, favoring the US dollar more heavily as the UK economy underperforms against the US. The dollar remains near two-decade highs, according to the DXY US dollar index, which measures the currency against six peers. DXY rose to 110.18 Monday’s high, not far from the 20-year high of 110.79 reached on September 7.

Risk-off sentiment is also helping the dollar rise as global banks are on an aggressive tightening path to try to contain uncomfortably high inflation. Several central banks are meeting this week, and Federal Reserve funds futures have been priced at a 79% chance of a 75 basis point rate hike this week and a 21% chance of a 100 basis points at the end of the two-day meeting of the Federal Reserve committee. For its part, the Bank of England is expected to raise rates between 50 and 75 basis points.

We expect the Bank of England to raise rates by 75 basis points, although the decision will likely be very balanced between 50 and 75 basis points,” analysts at TD Securities said.

While headline inflation has fallen recently to match the latest MPC forecasts, strong wage growth and record low unemployment argue for a 75 basis point increase. We also expect the MPC to approve the start of asset sales at a rate of £10bn per quarter.”

Technical levels