- GBP/USD remains confined in a narrow trading band through the first half of the European session.
- Slightly better-than-expected UK PMIs fail to provide any impetus amid a bleak economic outlook.
- A mildly softer tone around the USD offers some support ahead of the key FOMC meeting minutes.
The GBP/USD pair struggles to gain any meaningful traction on Wednesday and oscillates in a narrow band through the first half of the European session. The pair moves little and remains below the 1.1900 mark following the release of flash UK PMI prints.
The preliminary S&P Global/CIPS Composite PMI in November rose to 48.3 from 48.2 in the previous month, showing that business activity in the UK, in both the manufacturing and services sectors, contracted at a slightly slower pace than anticipated. Nevertheless, the data does not take away from the bleak outlook for the British economy, which, in turn, is seen acting as a headwind for the Pound and capping the GBP/USD pair. The downside, however, remains cushioned amid a mildly softer US Dollar, weighed down by rising bets for a less aggressive policy tightening by the Fed.
Investors now seem convinced that the US Federal Reserve might slow the pace of its rate-hiking cycle. In fact, the current market pricing indicates a greater chance of a relatively smaller 50 bps at the next FOMC policy meeting in December. This has been a key reason behind the recent sharp pullback in the US Treasury bond yields and weighs on the USD. That said, hawkish signals by several Fed officials suggest that the US central bank might continue to raise borrowing costs to combat stubbornly high inflation.
Hence, the market focus will remain glued to the November FOMC monetary policy meeting minutes, due later during the US session. Market participants will look for clues about the Fed's policy outlook and future rate hikes. This, in turn, will influence the USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Heading into the key event risk, the US macro data - Durable Goods Orders and the usual Weekly Initial Jobless Claims - could allow traders to grab short-term opportunities.
Technical levels to watch
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