- The pound hit a new daily low at 1.3866 and rallied higher.
- DXY rises modestly ahead of the Fed on the back of rising Treasury yields.
The GBP/USD it fell to 1.3866, reaching a new daily low before the FOMC decision. It then bounced back to 1.3900. The pound does not show a clear direction as market participants await the outcome of the Federal Reserve meeting.
Yields keep increasing; limited dollar before the Fed
Higher US yields keep the US dollar strong, but the rally is limited ahead of the FOMC. The 10-year yield rose to 1.68%, the highest level since January last year. The dollar’s momentum has been modest so far. The DXY modestly higher for the day as it continues to test the 92.00 area.
Dollar gains appear to be limited as traders await the Fed’s decision. No changes in monetary policy are expected. The focus will be on the new screenings and Powell. “We expect the Fed to revise its inflation and GDP growth projections upwards. We expect the midpoint for 2023 to continue to indicate that there will be no rate hikes until 2023, although individual points are likely to show the first rate hike in 2023. We also anticipate that Powell will repeat that discussions about rate cuts and increases they are premature, ”explained Danske Bank analysts.
On Thursday it is the Bank of England that will announce its decisions. The fees and the purchasing program are expected to remain on hold. “Following Governor Bailey’s comments on Monday, we are looking for a slightly more aggressive result compared to last week’s preview, with no pushback against increased yields in the statement, but more concern from pigeons in the minutes ”, mentioned the TDS analyst.
From a technical perspective, GBP / USD is moving sideways ahead of a risk event. The bias is unclear. The pair remains below the 20-day moving average (1.3945) and cannot move away from the 1.3900 area. A consolidation below 1.3850 would expose the 1.3800 area which, if broken, could trigger a bearish acceleration towards 1.3750. On the positive side, the critical level is still 1.4000. A close above would point to additional gains.
Technical levels
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