The GBP/USD pair broke out of its intraday consolidative trading range. It plummeted to two-day lows in the 1.3520-15 zone.
GBP/USD saw some selling on Wednesday. It was amid resurgent USD demand. Rebounding US bond rates and a lower risk tone supported the safe-haven USD.
Following the previous day’s positive two-way price fluctuations, the GBP/USD pair saw new selling on Wednesday. A number of reasons can explain this. The US dollar has made a strong recovery. Recovery happened by a little increase in US Treasury bond rates and a generally milder risk tone.
Markets appear to believe that the Fed will be obliged to take a more aggressive policy response. Fed needs to manage the faster-than-expected rise in inflationary pressures.
Investors are now looking for a new directional impulse in the form of US consumer inflation numbers. This, is as a critical component that works as a tailwind for US bond yields and supported the greenback.
British pound, by the Bank of England’s dovish decision was pulled down. It was to maintain interest rates constant last week. Concerns that the UK government would use Article 16 of the Northern Ireland Protocol, raises the likelihood of more GBP/USD losses.
Aside from that, a deterioration in trade sentiment in the equities markets could benefit the USD’s relative safe-haven character and lend credence to the bearish forecast.
However, investors may be hesitant to place bold wagers ahead of the release of US consumer inflation numbers.
The US CPI report, is due later in the early North American session. It may affect market expectations regarding the Fed’s next policy decision. Brexit fears, as well as a dovish Bank of England, weighed on the GBP added to the selling bias.
This, will play an important role in increasing USD demand in the near term and offer a new directional push to the GBP/USD pair.