- The pound is trying to extend its recovery from 1.3000 to levels beyond 1.3100.
- A more positive risk sentiment favors the British pound against the US dollar.
- In the longer term, GBP/USD remains negative, heading towards 1.2800 – Scotiabank.
The pound’s recovery from 16-month lows just below 1.3000 seen earlier this week is struggling to rise beyond 1.3100. The pound posts gains for the second consecutive day, although it seems to have found resistance just above the mentioned 1.3100.
GBP extends gains against a weakening USD
The GBP/USD is trading higher, buoyed by brighter market sentiment on Wednesday. Positive talk on the Ukraine peace talks and economic stimulus announced by the Chinese authorities boosted sentiment on Wednesday, sending stock markets higher to the benefit of the risk-sensitive pound and euro.
On the other hand, the US dollar appears to be pulling back, with investors bracing for a historic decision from the Federal Reserve. The Fed is widely expected to raise interest rates for the first time in three years in an effort to rein in inflation.
The dollar index, which measures the USD against a basket of the six most traded currencies, fell 0.4% after hitting intraweek lows at 98.28.
GBP/USD expected to fall towards 1.2800 – Scotiabank
Taking a longer-term perspective, Scotiabank’s FX research team expects the pound to resume its broader downtrend soon: “The balance of economic risks will also see the BoE offer a more apprehensive hike than the Fed, with the UK economy (household spending in particular) more susceptible to the impact of higher energy and food prices as a result of the war in Ukraine (…) The GBP could point to a test of 1.28 during the coming days/weeks on the combination of aggressive Fed and cautious BoE. ”
Technical levels
Source: Fx Street
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