The GBP/USD pair extends its consolidative price moves for the second successive day on Tuesday and remains confined in a range below the 1.2400 mark
during the Asian session. Spot prices, meanwhile, languish near the lowest level since June touched last week and the lack of buying interest suggests that the path of least resistance is to the downside.
The British Pound continues with its relative underperformance in the wake of diminishing odds for more aggressive policy tightening by the Bank of England , though subdued US Dollar demand lends some support to the GBP/USD pair. BoE Governor Andrew Bailey had told lawmakers recently that the central bank is now "much nearer" to ending its run of interest rate increases.
The USD, on the other hand, remains on the defensive below a more than six-month peak set last week and turns out to be a key factor holding back traders from placing fresh bearish bets around the GBP/USD pair. Traders also seem reluctant and prefer to wait on the sidelines ahead of this week's key central bank event risks – the highly-anticipated FOMC monetary policy decision on Wednesday and the BoE meeting on Thursday.
Market participants, however, seem convinced that the US central bank will stick to its hawkish stance and have been pricing in the possibility of one more 25 bps lift-off by the end of this year. Hence, the focus will be the Fed's so-called ‘dot plot’ and inflation expectations. Apart from this, investors will closely scrutinise Fed Chair Jerome Powell's remarks at the post-meeting press conference for cues about the future rate-hike path.
The attention will then turn to the pivotal BoE decision on Thursday. The UK central bank is all but certain to raise its benchmark interest rates by 25 bps to 5.5%, which would mark the highest level since 2007. Financial markets, however, hold the view that the streak of rises in borrowing costs since December 2021 is in its last days. This might continue to undermine the Streling.
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