Home Forex GBP/USD near weekly high, just below 1.1900 mid-point with ahead of US FOMC data/minutes

GBP/USD near weekly high, just below 1.1900 mid-point with ahead of US FOMC data/minutes

by SuperiorInvest
  • GBP/USD is up for a second day in a row, climbing to a new weekly high.
  • Bets on a less aggressive Fed rate hike weigh on the USD and offer support to the pair.
  • A better-than-expected UK PMI supports the GBP and adds to the upside.
  • Investors are now looking for some momentum in US macro data ahead of key FOMC minutes.

The GBP/USD pair is building on the previous day’s positive move and gaining some traction for the second day in a row on Wednesday. The pair has maintained its bid tone during the early North American session and is currently near the weekly high, just below the 1.1900 midpoint.

A combination of factors is keeping US dollar bulls on the defensive, which in turn is seen as a tailwind for the GBP/USD pair. Investors now appear confident that the US central bank will slow the pace of its rate-hiking cycle and see a better chance of a relatively smaller 50 basis point hike in December. This, along with the generally positive tone in equity markets, continues to weigh on the safe-haven dollar.

The British poundon the other, it draws support from reports that the UK government could seek a Swiss-style relationship with the European Union. This comes on the back of expectations that Bank of England will further raise interest rates to tame inflation. Flash UK PMIs further showed that economic activity slowed less than expected in November, further supporting the pound and pushing the GBP/USD pair higher.

In addition to the above fundamentals, the possibility of triggering some short-term trading stops on sustained strength above the 1.1900 mark provides further upside for spot prices. That is, bleak view for the UK economy could keep a lid on any further GBP/USD gains. Traders may also refrain from aggressive betting, preferring to wait for the FOMC minutes to be released later in the US session.

Meanwhile, the U.S. economic paper — including the release of flash PMIs, durable goods orders, weekly initial jobless claims and Sale of new houses – may provide some impetus to the GBP/USD pair. However, market reaction to US macro data will be more muted as investors await new clues on the Fed’s policy outlook and future rate hikes. This will affect USD price dynamics and determine the short-term trajectory of the major.

Technical levels to watch

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