- GBP / USD gains positive traction on Wednesday and moves further away from month-long lows.
- A subdued demand around the dollar and warmer-than-expected UK CPI figures provide a modest boost to the pair.
- Brexit and COVID-19 issues limit any further gains before the long-awaited FOMC decision.
GBP / USD has risen to fresh daily highs, above the 1.4100 level, in reaction to mostly upbeat UK economic data.
The pair has built on the good bounce the day before, from the 1.4035-30 region at a month-long lows, and has gained some positive traction during the first half of trading action on Wednesday. A subdued demand for the US dollar has been seen as a key factor offering some support to the GBP / USD pair, which has gained additional momentum after the release of warmer than expected UK inflation figures.
According to data released by the UK Office for National Statistics (ONS), the headline CPI held steady at 0.6% in May and accelerated 2.1% year-on-year from 1.5% the previous month. Excluding volatile prices for food and energy items, the core CPI was up 2.0% year-on-year for the reported month versus estimates for a 1.5% reading.
Barring the initial reaction, the GBP / USD pair, until now, had lacked a strong continuation buy. Concerns about the EU-UK showdown over the Northern Ireland protocol and the UK government’s decision to delay the final phase of easing the lockdown measures have acted as a headwind for the British pound. . Investors also seem reluctant to open aggressive positions ahead of the key FOMC decision.
The latest update to the Fed’s monetary policy will be closely scrutinized for clues about a possible change in the monetary policy outlook and whether members have started discussion to cut the current $ 120 billion in monthly bond purchases. This will play a key role in influencing the USD in the short term and could generate further directional momentum to the GBP / USD pair.
GBP / USD technical levels
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