- GBP/USD moves lower for the fourth day in a row amid sustained buying interest around the USD.
- Expectations of an aggressive Fed rate hike and risk-off sentiment drive USD to more than two-year highs.
- Diminishing odds of further Bank of England tightening also weighs on the British pound.
The pair GBP/USD has seen some selling during the early part of the European session on Tuesday and has dropped back to the 1.2700 areareturning to approach the annual minimum touched the previous day.
After an initial rally to the 1.2770 regionGBP/USD found fresh selling on Tuesday and turned lower for the fourth day in a row amid fresh buying around the US dollar. The prospect of rapid interest rate hikes in the US, coupled with the prevailing sentiment of risk aversion, pushed the USD to its highest level since March 2020. and put downward pressure on the pair.
The markets have been betting on a more aggressive tightening of monetary policy by the Fed and they expect a 50 basis point rate hike at each of the next four FOMC meetings in May, June, July and September. Apart of this, New COVID-19 lockdowns in China fuel concerns about a global economic slowdownweighing on global risk sentiment and benefiting traditional safe-haven assets such as the dollar.
On the other hand, sterling was hit by recent disappointing domestic data, which indicated that the UK economy is under stress from rising cost of living. This forces investors to reduce their expectations about future interest rate hikes by the Bank of England and supports the prospects of a further bearish move for the GBP/USD pair amid the absence of relevant economic releases from the UK.
Later, at the start of the American session, investors will take cues from the US economic calendar, with the release of Durable Goods Orders and the Conference Board Consumer Confidence Index. Aside from this, broader market risk sentiment will influence USD price dynamics and could create some short-term opportunities around GBP/USD.
GBP/USD technical levels
Source: Fx Street
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