- GBP/USD falls for the second day in a row as sellers hold 1.2200, coupled with a boost in risk appetite.
- The strength of the US dollar is keeping the greenback afloat against most of the G10 currencies.
- Gloomy comments from Fed officials strengthened the dollar, which was a headwind for GBP/USD.
- The Bank of England is expected to raise rates in the August 4 interest rate decision.
The pound sterling lost ground and fell almost 0.26% during the US session on Wednesday. Rising US Treasury yields, “hawkish” comments from Fed officials and improving sentiment are headwinds for the GBP/USD.
GBP/USD is trading at 1.2146, having reached a daily high of 1.2207, just above the 50 day EMA, but the buyers could not hold on, leaving the major currency exposed to selling pressure, for as GBP/USD dipped towards a daily low at 1.2100.
GBP/USD hurt by risk appetite and rising US dollar
European and US stocks are trading in the green. Data from the US Institute of Supply Management revealed that July non-manufacturing activity, also known as services PMI, surprisingly beat expectations, rising to 56.7, versus estimates of 53.5, and higher than June 55.9. The data showed that consumers are shifting from goods to services as the US Manufacturing ISM report showed signs of slowing.
Meanwhile, Fed officials continue to make statements. Mary Daly of the San Francisco Fed said raising 50 basis points “would be reasonable to do in September” but would depend on the data. She added that if inflation remains higher, a “75 basis point hike would be more appropriate.” Meanwhile, Richmond Fed President Thomas Barkin said recession fears are inconsistent with the job market growing nearly 400,000 a month, with the unemployment rate at 3.6%.
Earlier, St. Louis Fed President James Bullard said he wants the Federal Funds Rate (FFR) at 3.75-4.00% by the end of the year, adding, “We’re going to make the inflation returns to 2% over time.
As regards the UK, the final global composite and services PMIs for July. The former dropped to 52.6 from an estimated 53.3, while the latter dropped to 52.1 from a preliminary 52.8. UK stagflation fears continue to rise as GBP/USD traders brace for Thursday’s Bank of England monetary policy decision, where the ‘old lady’ is expected to hike rates by 50 basis points to the 1.75%.
What must be considered
The UK economic docket will include the Bank of England’s monetary policy decision along with the S&P World Construction PMI. The US calendar will include initial jobless claims, along with other Fed officials making statements.
GBP/USD key technical level
Source: Fx Street
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