- A modest pickup in USD demand triggers some selling around GBP / USD on Wednesday.
- The previous day’s rise in US bond yields offers some support for the USD ahead of the FOMC.
- The optimistic UK economic outlook could continue to prop up the GBP and help limit deeper losses in the pair.
The pair GBP/USD remains under pressure at the start of the European session on Wednesday and has fallen around the region of 1.3870-65. At the time of writing, the pair has managed to rally a few pips and is holding around 1.3875, still losing 0.25% on the day.
Having had a hard time finding acceptance above the 1.3900 level, the pair witnessed a modest pullback on Wednesday and, for now, it seems to have broken three consecutive days of winning streak. The US dollar has strengthened with the previous day’s strong recovery in US Treasury yields, recovering further from the multi-week lows touched earlier this week. This, in turn, has been seen as a key factor that has sparked some selling around the GBP / USD pair.
When the two-day FOMC meeting began on Tuesday, upbeat US economic data pushed the benchmark 10-year US government bond yield above the 1.60% level. In fact, Conference Board consumer confidence index jumped to pre-pandemic highs and rose to 121.7 points in April from 109.0 the previous month. The rally in the USD could also be attributed to some repositioning ahead of the FOMC’s latest monetary policy decision.
The US central bank is expected to. keep your monetary policy settings unchanged. That said, rising inflation expectations could force the Fed to begin laying the groundwork for a future tightening of monetary policy. Therefore, the key focus will be on the accompanying monetary policy statement. This, along with comments from Fed Chairman Jerome Powell, will play a key role in influencing USD price dynamics and providing new directional momentum to the GBP / USD pair.
In the meantime, The drop is likely to remain limited, at least for now, amid optimism about the rapid rollout of coronavirus vaccines and the continuing decline in UK cases. The UK’s vaccine minister confirmed on Tuesday that 25% of all adults have now been fully vaccinated. This bodes well for British Prime Minister Boris Johnson’s plan for the gradual reopening of the economy.
GBP / USD technical levels
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