Pound Still Hesitant, What Are Markets Waiting For?
The GBP/USD pair remained below the three-year highs touched on Friday, albeit lacked bearish conviction and oscillated in a narrow range around mid-1.3500s through the Asian session. Traders seemed reluctant and preferred to wait for this week’s key data/central bank event risk before positioning for the next leg of a directional move in the spot prices.
The latest UK consumer inflation figures are due on Wednesday ahead of the Bank of England (BoE) policy meeting on Thursday, which will play a key role in influencing the British Pound (GBP). Further, the US Federal Reserve (Fed) is scheduled to announce its policy decision on Wednesday, which would drive the US Dollar (USD) and provide some meaningful impetus to the GBP/USD pair.
Meanwhile, Friday’s weaker UK GDP data, which showed that the economy contracted by more than expected by 0.3% in April, raised expectations that the BoE will cut interest rates more aggressively than anticipated. On the other hand, the USD found support from the global flight to safety, triggered by rising geopolitical tensions in the Middle East, and contributed to capping gains for the GBP/USD pair.
However, growing acceptance that the US central bank will also resume its rate-cutting cycle in September, amid signs of easing inflation in the US, held USD investors from placing aggressive bets. Moreover, a generally positive risk tone acted as a headwind for the safe-haven dollar and extended some support to the GBP/USD pair, warranting some caution before confirming that spot prices have topped out.
Source: FXStreet
