- GBP/USD is trading higher at the start of the European session on Monday amid subdued demand for the USD.
- Uncertainty about the Fed’s rate hike path is seen as a key factor weakening the dollar.
- The lack of significant buying warrants some caution on the part of aggressive bulls.
The GBP/USD pair advances on the first day of the new week, although it lacks buying to allow it to continue to advance or consolidate its modest intraday gains just above the 1.2600 level.
The release of a mixed US jobs report on Friday ensures that the Fed will keep rates unchanged at its September meeting, which does not help the dollar to capitalize on last week’s strong move higher, approaching back to the August monthly high. Conversely, the Bank of England (BoE) is anticipated to continue its monetary policy tightening cycle to combat high inflation, which turns out to be another factor acting as a tailwind for GBP/USD. It is worth recalling that BoE Deputy Governor Ben Broadbent had said that policy rates may have to remain in tight territory for some time as the effects of higher prices are unlikely to wear off quickly.
For his part, BoE chief economist Huw Pill said last Thursday that inflation in the UK remains “too high” and added that there is a lot of monetary policy pending. That being said, the lack of buying interest warrants some caution before entering any new bullish positions around the GBP/USD pair and positioning for any significant move higher. Markets continue to price in the possibility of an additional 25 basis point Fed rate hike later this year. This remains support for high US Treasury yields, which in turn support the dollar and cap the pair’s rise amid growing concerns of a deeper global economic recession.
Traders are also reticent in the absence of relevant economic releases in the UK and the US holiday. However, GBP/USD, for now, seems to have stopped a two-day losing streak, although it remains very close to its lowest level since June 13, around the 1.2550-1.2545 area that it touched. in August. This zone should now act as a key point and help determine the next directional move for the pair.
GBP/USD 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.
