- GBP/USD comes under fresh selling pressure and falls back to more than two-week lows.
- The Fed’s tightening outlook and rising US bond yields revive demand for dollars and weigh on the pair.
- The boost in risk appetite limits the gains of the dollar and the fall of the main currencies.
The pair GBP/USD meets a new offer on Wednesday and returns below 1.2100 during the American mid session. The pair is currently sitting a few points above the 2 1/2 week low reached on Tuesday, and bears are still waiting for a sustained break below the important 200-day SMA.
The US dollar regains positive traction and recovers some of the heavy losses from the previous day, which, in turn, is seen as a key factor putting downward pressure on GBP/USD. As investors digest the Bank of Japan’s surprising policy change, the Fed’s hawkish outlook last week helps the dollar attract further buying. It should be remembered that the US central bank indicated that it will continue raising interest rates to squash inflation and projected an additional 75 basis point hike by the end of 2023.
Elsewhere, sterling continues to be hurt by the dovish outcome of the Bank of England (BoE) meeting, where two members of the Monetary Policy Committee voted to keep rates unchanged. This, coupled with mounting recession fears, further contributes to the offered tone surrounding the GBP/USD pair. That being said, the bullish momentum in US equity markets could curb aggressive bullish bets on the dollar. This, in turn, could help limit losses for major pairs.
Therefore, it would be prudent to wait for follow-through selling and acceptance below a technically significant 200-day SMA before placing aggressive bearish bets on GBP/USD. However, the fundamental background suggests that the path of least resistance for spot prices is to the downside and supports the prospects for further depreciation in the near term. The release of the US Conference Board Consumer Confidence Index is expected for further impetus during the early hours of the North American session.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
