Additionally, the University of Michigan's latest Consumer Sentiment Survey showed that the long-run inflation expectation declined to 2.8% from 3.1%. Investors will try to figure out whether the Fed will stay on an aggressive tightening path after the latest data caused recession fears to escalate. The US central bank is set to raise its policy rate by 75 bps and such a decision by itself shouldn't trigger a significant market reaction. Nevertheless, a hawkish Fed surprise could provide a boost to the dollar and force GBP/USD to turn south. A 50 basis points (bps) BOE hike in August is nearly fully priced in and a majority of respondents that took part in a Reuters poll expect the bank rate to be at 2.25% by end-2022, compared with 1.75% previously. The pair trades within a touching distance of key resistance that seems to have formed at 1.2070 and buyers need to flip that level into support for the recovery to remain intact.Īlthough the dollar capitalizes on safe-haven flows on Tuesday, hawkish Bank of England (BOE) bets allowed the British pound to stay resilient against its major rivals. GBP/USD has managed to limit its losses despite the broad-based dollar strength on Tuesday and continued to edge higher early Wednesday.
FOMC's policy announcements could significantly impact the dollar's valuation.1.2070 aligns as a key resistance level for the pair.GBP/USD has regained its traction following Tuesday's choppy action.
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