GBP/USD surrenders modest intraday gains amid modest USD uptick, holds above 1.2000 mark – by hareshmenghani GBPUSD Recession Fed BOE Currencies
iday. The pair retreats to the lower end of its daily range during the first half of the European session, though manages to hold above the 1.2000 psychological mark.
A combination of supporting factors assists the US Dollar to regain some positive traction, which, in turn, acts as a headwind for the GBP/USD pair. Against the backdrop of looming recession risks, fresh geopolitical tensions continue to weigh on investors' sentiment and benefit the Greenback's relative safe-haven status. Adding to this, firming expectations that the Fed will stick to its hawkish stance provide a modest lift to the USD.
In fact, the markets are now pricing in at least a 25 bps lift-off at each of the next two FOMC policy meetings in March and May. The bets were reaffirmed by the US CPI and PPI data last week, which showed that inflation isn't coming down quite as fast as hoped. In contrast, the softer-than-expected UK consumer inflation figures fueled speculations that the Bank of England's current rate-hiking cycle might be nearing the end.
The divergent Fed-BoE policy expectations also contribute to capping the upside for the GBP/USD pair. The downside, however, seems cushioned, at least for the time being, amid relatively thin trading volumes in the wake of the President Day's holiday in the US. Traders also seem reluctant and might refrain from placing aggressive bets ahead of the latest FOMC
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