- GBP/USD continues to receive support from some profit taking around the USD.
- Reduced expectations of aggressive Fed rate cuts and BoE uncertainty could limit the rise.
- Traders are also reluctant ahead of the BoE Monetary Policy Report Hearings.
The GBP/USD pair attracts buyers for the second day in a row on Tuesday amid a modest pullback in the US Dollar (USD) and rises again approaching the 1.2700 level during the Asian session. However, spot prices lack bullish conviction as investors choose to wait for the Bank of England (BoE) Monetary Policy Report Hearings before opening aggressive directional positions.
BoE Governor Andrew Bailey and several MPC members will testify on inflation and the economic outlook before Parliament’s Treasury Committee. This will play a key role in influencing market expectations for possible interest rate adjustments in the future, which will, in turn, boost the British Pound (GBP) and provide a significant boost to the GBP/USD pair.
Attention will then turn to the latest UK consumer inflation figures on Wednesday. Meanwhile, falling US Treasury yields cause some profit-taking around the US Dollar (USD) and move it away from the yearly high (YTD) set last week. This, coupled with a positive risk tone, weakens the safe-haven dollar and acts as a tailwind for the GBP/USD pair.
Any significant depreciation of the USD, however, appears elusive amid expectations that US President-elect Donald Trump’s policies are likely to reignite inflationary pressures and limit the scope for further rate cuts by the Federal Reserve. (Fed). This should keep US bond yields elevated and favor USD bulls, which, in turn, could limit GBP/USD gains.
Additionally, uncertainty over the BoE’s path forward on interest rates could help keep a lid on spot prices. Therefore, it will be prudent to wait for strong follow-through buying before confirming that the GBP/USD pair has bottomed and positioning for any significant recovery from levels below 1.2600, or a multi-month low touched last week.
economic indicator
Testimony before Parliament of BOE authorities
The Finance Commission is appointed by the House of Commons to examine the spending, administration and policy of the Treasury, HM Revenue & Customs, and associated public bodies including the Bank of England and the Financial Services Authority.
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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.
