- GBP/USD rises, hovering just below 1.3100 amid better risk appetite ahead of the FOMC and BoE meetings.
- Russo-Ukrainian rhetoric has been a bit more constructive, lifting sentiment, and US retail sales data was weak.
While caution ahead of the Fed policy announcement is likely to prevent the pair from pushing above 1.3100 and open the door for a rally towards 1.3200, the GBP/USD continues to trade firmly at the 1.3090 area. The pound rose 0.4%, buoyed by a broad rebound in risk appetite on Wednesday that reflects the constructive turn in talks between Russia and Ukraine of late, as well as the continued pullback associated with commodity prices. cousins.
The latest weaker-than-expected US retail sales report may not have helped the US dollar, while the British pound may continue to gain some benefit from decent UK employment data on Tuesday.
Ukrainian President Volodymyr Velenskiy said Wednesday that while more time is needed, talks with Russia sounded more realistic and has stressed that Ukraine understands it cannot join NATO. Russian officials have hinted that a deal may be close. Whether GBP/USD can sustain/extend its recent recovery from weekly lows just above 1.3000 on Wednesday will depend on the next Fed meeting.
The central bank is expected to raise interest rates by 25 bps. The market’s main focus will be on the new economic forecasts and the bank’s dot chart, as well as Fed Chairman Jerome Powell’s tone at the press conference. Investors are keen to gauge the extent to which Powell will be willing to continue to tighten policy to control inflation, even as growth slows as a result of recent geopolitical events.
Analysts noted that caution ahead of the BoE’s policy announcement (on Thursday) is likely to prevent sterling from reaping risk gains as strongly as some of its peers. With more twists and turns in the Russian and Ukrainian story likely to come, GBP/USD traders will need to be on their toes.
Additional technical levels
Source: Fx Street
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