- GBP/USD jumps to a fresh multi-week high amid the emergence of fresh USD selling.
- A positive intraday turnaround in the risk sentiment weighs on the safe-haven buck.
- Brexit woes might cap gains for the British pound ahead of the crucial FOMC decision.
The GBP/USD pair attracts some dip-buying near the 1.1960 area on Monday and shoots to a nearly three-week peak during the mid-European session. The pair is last seen trading around the 1.2065-1.2070 region, up over 0.50% for the day.
Friday's better-than-expected flash UK PMI prints reaffirmed market bets for a 50 bps rate hike by the Bank of England in August and continued acting as a tailwind for the British pound. On the other hand, a positive turnaround in the global risk sentiment - as depicted by a strong intraday rally in the equity markets - weighs on the safe-haven US dollar. In fact, the USD Index languishes near its lowest level since July 5 touched on Friday, which, in turn, is seen as another factor that provides a goodish lift to the GBP/USD pair.
That said, growing concerns about a global economic downturn could keep a lid on any optimistic move in the markets. Apart from this, a goodish rebound in the US Treasury bond yields could offer support to the safe-haven greenback. Investors also remain worried that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union amid the ongoing cost-of-living crisis. This could act as a headwind for sterling and further contribute to capping any meaningful upside for the GBP/USD pair.
Investors might also be reluctant to place directional bets and prefer to wait for the outcome of the crucial FOMC monetary policy meeting on Wednesday. The Fed is widely expected to hike interest rates by 75 bps, though recession fears could force the US central bank to slow the pace of its aggressive policy tightening path. This, in turn, suggests that the Fed's policy outlook will now play a key role in influencing the USD price dynamics and help investors to determine the near-term trajectory for the GBP/USD pair.
In the meantime, the broader market risk sentiment and the trend of US bond yields will drive the USD demand amid absent relevant market moving economic releases from the US, on Monday. Hence, it remains to be seen if the GBP/USD pair is able to capitalize on the positive move or be met with a fresh supply at higher levels. Nevertheless, acceptance above the 1.2045 horizontal resistance could be seen as a trigger for intraday traders and might have already set the stage for a further near-term appreciating move.
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 bounces to 0.6450, shrugs off mixed Australian jobs data
AUD/USD is rebounding to test 0.6450 amid renewed US Dollar weakness in the Asian session on Thursday. The pair reverses mixed Australian employment data-led minor losses, as risk sentiment recovers.
USD/JPY bounces back toward 154.50 amid risk-recovery
USD/JPY bounces back toward 154.50 in Asian trading on Thursday, having tested 154.00 on the latest US Dollar pullback and Japan's FX intervention risks. A recovery in risk appetite is aiding the rebound in the pair.
Gold rebounds on market caution, aims to reach $2,400
Gold price recovers its recent losses, trading around $2,370 per troy ounce during the Asian session on Thursday. The safe-haven yellow metal gains ground as traders exercise caution amidst heightened geopolitical tensions in the Middle East.
Manta Network price braces for volatility as $44 million worth of MANTA is due to flood markets
Manta Network price was not spared from the broader market crash instigated by a weakness in the Bitcoin market. While analysts call a bottoming out in the BTC price, the Web3 modular ecosystem token could suffer further impact.
Investors hunkering down
Amidst a relentless cautionary deluge of commentary from global financial leaders gathered at the International Monetary Fund and World Bank Spring meetings in Washington, investors appear to be taking a hiatus after witnessing significant market movements in recent weeks.