- GBP/USD gains some positive traction on Wednesday amid dovish USD action.
- Recession fears and the gloomy outlook for the Bank of England could act as a headwind and limit the pair’s rise.
- Also, investors might prefer to stay on the sidelines ahead of the US CPI report.
The pair GBP/USD moves higher during the first half of the European session on Wednesday and reaches the zone of 1.2100 in the last hour.
The uncertainty about the Fed’s rate hike path it keeps the dollar bulls on the defensive, which in turn offers some support to the GBP/USD pair. On Monday, the New York Fed’s survey of consumer expectations showed the outlook for inflation fell sharply in July. This could have pushed back speculation of a more aggressive Fed tightening. However, markets still price the chance of a 75 basis point rate hike at the September FOMC meeting at 70%.
Therefore, the market’s attention will continue to focus on the latest US consumer inflation figures, which will be published later at the beginning of the American session. The US CPI report will be considered for further clues on the Fed’s near-term monetary policy outlook, which will play a key role in influencing dollar price dynamics. In the meantime, the caution prevailing in the markets (amid rising fears of a recession) could support the US dollar as a safe haven. This along with the gloomy prospects of the Bank of Englandshould cap the GBP/USD pair.
Even from a technical point of view, the appearance of fresh sales near the 1.2130-1.2140 area since the beginning of this week warrants bulls’ caution. This makes it prudent to wait for strong continuation buying before positioning for any intraday moves higher amid the absence of market-relevant economic data from the UK.
GBP/USD technical levels
Source: Fx Street
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