- GBP/USD oscillates in a narrow trading band above the 1.2300 mark on Wednesday.
- Recession fears benefit the safe-haven USD and act as a headwind for the major.
- Expectations that the BoE will continue raising rates lends support and limit losses.
The GBP/USD pair struggles to gain any meaningful traction on Wednesday and oscillates in a narrow band through the early part of the European session. Spot prices hold above the 1.2300 mark, though remain well within the striking distance of a one-week low touched on Tuesday.
A softer risk tone benefits the US Dollar's relative safe-haven status against its British counterpart and turns out to be a key factor acting as a headwind for the GBP/USD pair. The USD bulls, however, seem reluctant amid firming expectations for a less aggressive policy tightening by the Fed. In fact, the markets have been pricing in a greater chance of a smaller 25 bps Fed rate hike in February. This, in turn, should keep a lid on any meaningful upside for the greenback.
Apart from this, speculations that elevated consumer inflation will maintain pressure on the Bank of England (BoE) to continue raising interest rates should limit the downside for the GBP/USD pair. In fact, the UK Office for National Statistics reported last week that the core CPI in the UK stayed at 6.3% in December or more than three times the BoE's 2% target. This, in turn, favors bullish traders and supports prospects for the emergence of some dip-buying around the major.
Nevertheless, the GBP/USD pair, for now, seems to have stalled the recent corrective pullback from the vicinity of mid-1.2400s, or its highest level since June 2022 touched on Monday. There isn't any major market-moving US economic data due on Wednesday. That said, the broader market risk sentiment might drive the USD and provide some impetus to the major. The focus, meanwhile, remains on the Advance US Q4 GDP print and the Core PCE Price Index on Thursday and Friday, respectively, which should influence the Fed's rate-hike path and determine the near-term trajectory for the buck.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD could extend the recovery to 0.6500 and above
The enhanced risk appetite and the weakening of the Greenback enabled AUD/USD to build on the promising start to the week and trade closer to the key barrier at 0.6500 the figure ahead of key inflation figures in Australia.
EUR/USD now refocuses on the 200-day SMA
EUR/USD extended its positive momentum and rose above the 1.0700 yardstick, driven by the intense PMI-led retracement in the US Dollar as well as a prevailing risk-friendly environment in the FX universe.
Gold struggles around $2,325 despite broad US Dollar’s weakness
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Bitcoin price makes run for previous cycle highs as Morgan Stanley pushes BTC ETF exposure
Bitcoin (BTC) price strength continues to grow, three days after the fourth halving. Optimism continues to abound in the market as Bitcoiners envision a reclamation of previous cycle highs.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Federal Reserve might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.