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- GBP/USD meets with a fresh supply as the USD regains positive traction after the post-FOMC fall.
- Fed rate hike remains on the table amid inflation fears, supporting the USD amid Mideast tensions.
- Traders now look forward to the key BoE rate decision and important US macroeconomic releases.
The GBP/USD pair struggles to capitalize on the previous day’s strong move up to the weekly high and drifts lower during the Asian session on Thursday. Spot prices currently trade around mid-1.3300s, down over 0.10% for the day, and, for now, seem to have stalled the recovery move from a nearly four-week low, touched on Tuesday.
The US Dollar (USD) regains some positive traction following the previous day’s post-FOMC slide to an over one-week low and turns out to be a key factor exerting downward pressure on the GBP/USD pair. As was widely expected, the US Federal Reserve (Fed) held interest rates steady at the end of a two-day meeting on Wednesday. The central bank, however, refrained from adopting a more aggressive stance on monetary policy, which, in turn, weighed heavily on the Greenback.
Meanwhile, the on-hold rate decision was far from unanimous, featuring three dissents in a 9–3 vote, which reflected a deeply divided central bank. Furthermore, traders are still pricing in a greater chance of at least one interest rate hike by the end of this year amid rapidly shifting inflationary dynamics due to volatile oil prices. This, along with a further escalation of tensions in the Middle East, helps the safe-haven USD to attract some dip-buyers and is seen weighing on the GBP/USD pair.
Traders, however, might refrain from placing aggressive directional bets and opt to wait for the crucial Bank of England (BoE) policy decision, due later today. This will be followed by important US macro releases – the Advance Q2 GDP report and the Personal Consumption Expenditures (PCE) Price Index. Apart from this, the incoming geopolitical headlines will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair.
