GBP/USD: Sterling fears the virus, Fed pushes the dollar higher and data may compound it

FXStreet Insights Team FXStreet

GBP/USD remains below 1.42. Concerns that the UK reopening could be delayed and Fed's taper hints may send sterling down, according to FXStreet’s Analyst Yohay Elam.

Potentially upbeat US data support the dollar

“UK Prime Minister Boris Johnson has denied there is a need to delay the last stage of the UK's reopening but said that more information is needed. The usually confident PM has seemed more cautious after daily COVID-19 cases topped 4,000 and continue their uptrend.”

“While Britain's vaccination campaign is well-advanced – and continues at full speed – the new increase in infections is becoming more worrying. The Delta variant, originally identified in India, remains of concern to the UK and its neighbors, which are wary of receiving people arriving from Britain. The reopening – dubbed ‘Freedom Day’ is due on June 21.”

“The dollar is gaining ground after the Federal Reserve sent hints it would taper its bond-buying scheme. Philadelphia Fed President Patrick Harker said that he favors "thinking about thinking" of reducing purchases, and his words came as the bank scrapped a minuscule corporate bond-buying scheme. Every march begins with baby steps.

“The Fed is responding to several upbeat inflation figures and Thursday's ISM Services Purchasing Managers' Index is the next to reflect on price pressures. The parallel release for the manufacturing sector painted a picture of shortages due an unbalanced supply/demand picture.”

“The ISM Services PMI also serves as a hint toward Friday's Nonfarm Payrolls figures, and so does ADP's labor market report, which is set to show an increase of over 600,000 private-sector positions.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's 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 holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in 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. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk

Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.

Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

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.