- GBP/USD is currently trading sideways below 1.2350 as traders monitor the Fed’s speech and Brexit news.
- For now, dollar consolidation keeps the pair above 1.2300, but fears that the UK may scrap the Northern Ireland protocol are weighing on us.
Amid a widely mixed and indecisive feeling about risk appetite, the GBP/USD it is moving sideways at the 1.2350 lows and has found decent support above 1.2300 and recent lows in the mid 1.2250 for now. But the pair has also been unable to mount a test of resistance in the 1.2400 area as negative themes such as concerns about the economy and now also growing fears over further Brexit related tensions keep the British pound repressed.
Regarding the former, concerns about the outlook for the UK economy and the BoE’s monetary tightening with the UK enduring its worst cost of living crisis in decades saw GBP/USD fall below 1.3000 late in the day. or mid-May. Last week’s dovish BoE meeting, which signaled a high risk of a recession in 2023 and a drop in inflation below the bank’s target range towards the end of its forecast, exacerbated losses and saw the GBP/USD drop to 1.2200 at the end of last week.
While a pullback in US yields from recent highs, as Fed policymakers reject the idea of a 75bp rate hike, is helping the US dollar stabilize in Leading up to the release of US consumer price inflation data on Wednesday, GBP/USD’s upside potential is limited for now. Brexit risk premiums are growing amid reports that the UK is about to scrap the Northern Ireland Protocol (NIP) due to political deadlock following regional elections in Northern Ireland.
If the UK did this, it would increase tensions with the EU and probably lead to some sort of response. Uncertainty over the whole issue is likely to limit sterling’s rally for now. Going forward, a barrage of Fed speeches and any Brexit news will be the day’s main market drivers, with influential FOMC member John Williams already speaking (and sticking to Chairman Jerome Powell’s script).
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
