GBP/USD displays volatility contraction below 1.2400 ahead of US/UK PMIs

GBP/USD is showing a lackluster performance as investors await US/UK PMIs for fresh cues.
The Fed might decelerate its interest rate hike pace again to 25 bps in its February policy meeting.
UK’s Manufacturing PMI might trim to 45.0 while Services PMI to remain steady at 49.9.

Sagar Dua FXStreet

The GBP/USD pair is displaying topsy-turvy moves around 1.2380 as investors are awaiting the release of the S&P PMI number for the United States and the United Kingdom for fresh impetus. The Cable is demonstrating signs of volatility contraction as market sentiment has been caught by caution.

S&P500 futures are showing marginal losses after a bullish Monday, portraying a caution in getting gung-ho over risk-sensitive assets. Meanwhile, the return generated by the US government bonds has trimmed marginally as the odds of deceleration in the pace of hiking interest rates by the Federal Reserve (Fed) in its February monetary policy meeting are escalating further. The 10-year US Treasury yields have slipped to near 3.51%.

The US Dollar Index (DXY) recovered firmly on Monday after dropping to near a seven-month low around 101.20, however, the upside move got restricted above 101.80.

Inflation in the United States is declining and has been confirmed by various catalysts. Retail demand is subdued, employment is not generating at a healthy pace, the scale of economic activities is falling, and firms are offering products at lower prices at factory gates. This is resulting in rising expectations that the Federal Reserve (Fed) might trim the extent of the interest rate hike again.

Fed chair Jerome Powell has already trimmed the interest rate hike extent to 50 basis points (bps) in its December monetary policy meeting after four consecutive 75 bps rate hikes. The Fed is expected to hike interest rates by 25 bps ahead. As per the CME FedWatch tool, the chances of a 25 bps interest rate hike stand more than 98%.

But before that, investors’ focus will remain on the release of Tuesday’s United States S&P PMI data. The Manufacturing PMI is seen lower at 46.1 from the former release of 46.2 while the Services PMI might contract to 44.5 vs. the prior figure of 44.7.

On the United States front, preliminary Manufacturing PMI (Jan) is seen contracting to 45.0 against the prior release of 45.3. The Services PMI is seen steady at 49.9. Apart from that, UK’s Producer Price Index (PPI) data will remain in focus, which is scheduled for Wednesday.

GBP/USD

Overview
Today last price	1.2376
Today Daily Change	0.0003
Today Daily Change %	0.02
Today daily open	1.2373

Trends
Daily SMA20	1.2159
Daily SMA50	1.2123
Daily SMA100	1.1732
Daily SMA200	1.1975

Levels
Previous Daily High	1.2448
Previous Daily Low	1.2324
Previous Weekly High	1.2436
Previous Weekly Low	1.2169
Previous Monthly High	1.2447
Previous Monthly Low	1.1992
Daily Fibonacci 38.2%	1.2371
Daily Fibonacci 61.8%	1.2401
Daily Pivot Point S1	1.2315
Daily Pivot Point S2	1.2257
Daily Pivot Point S3	1.2191
Daily Pivot Point R1	1.244
Daily Pivot Point R2	1.2506
Daily Pivot Point R3	1.2564

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

AUD/USD hangs near three-week low, above 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, trading around 0.7120 and close to a three-week low during the Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY remains below 155.50 as bulls await the key Fed decision

USD/JPY climbs to a fresh one-week high during the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. Spot prices, however, remain below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold struggles below $4,300, near one-month low as Fed decision looms

Gold remains depressed below $4,300 during the Asian session on Wednesday as traders look to the crucial Fed decision for a fresh impetus. Meanwhile, a surge in US bond yields, bolstered by oil-driven inflation fears, continues to weigh on the non-yielding bullion. Furthermore, escalating Middle East tensions underpin the safe-haven US Dollar and contribute to a weaker tone around the XAU/USD.

Ethereum continues to attract capital despite impending rate hike and Clarity Act failure

Ethereum declined to $2,400 on Tuesday after the Clarity Act failed to progress in the Senate. Despite that and the market's near certainty of an interest rate hike at the next Federal Reserve (Fed) meeting, the top altcoin has continued to attract fresh capital. Ethereum buyers have been dominating sellers over the past few days.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.