- GBP/USD comes under new selling pressure on Thursday, although it doesn’t follow through.
- Expectations of an aggressive Fed rate hike revive demand for the dollar and put some downward pressure on the pair.
- A positive risk tone caps the safe haven dollar and helps limit the pair’s decline.
The pair GBP/USD finds it difficult to take advantage of the modest rise of the previous day and finds himself with new sales on Thursday. The pair remain on the defensive during the first half of the European session, although for the moment manages to stay above the psychological level of 1.1500.
The US dollar strengthens amid expectations of more aggressive tightening of the Fed’s monetary policy, which turns out to be a key factor putting some downward pressure on the GBP/USD pair. Data on consumer inflation in the US, published on Tuesday, practically confirmed that the Fed will raise interest rates at a faster pace. In fact, the implied odds of a 1% hike at the September FOMC meeting currently stand at 30%.
In addition, markets have been pricing in the possibility of another interest rate hike from the Fed in November. This remains supportive of elevated US Treasury yields and continues to support the dollar. Having said that, the generally positive risk tone is limiting dollar gains as a safe haven. Apart of this, Prospects for a 75 basis point rate hike by the Bank of England on September 22 offer GBP/USD support.
This makes it prudent to wait for a strong sell-off before positioning for an extension of the post-US CPI sharp decline from a two-week high. In the absence of any relevant economic data out of the UK, traders expect US macro releases to provide some momentum later in the American session today.
Monthly retail sales figures, weekly initial jobless claims, regional manufacturing indices and industrial production data will be released on Thursday’s US economic calendar. This coupled with US bond yields and broader risk sentiment will weigh on the dollar and produce short-term opportunities around the GBP/USD pair.
GBP/USD technical levels
Source: Fx Street
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