GBPUSD SIGNAL 27-07-22 : GBPUSD sticks to modest gains around mid-1.2000s, upside seems limited ahead of FOMC.


GBPUSD SIGNAL 27-07-22 : GBPUSD sticks to modest gains around mid-1.2000s, upside seems limited ahead of FOMC.

  • GBP/USD regained positive traction on Wednesday amid modest USD weakness.
  • The risk-on impulse was seen as a key factor that undermined the safe-haven buck.
  • Traders seem non-committed and might prefer to wait for the key FOMC decision.

The GBPUSD pair caught fresh bids on Wednesday and built on the previous day’s modest rebound from the 1.1965-1.1960 support zone. The pair, however, retreated a few pips from the daily high and was seen trading around the mid-1.2000s during the early European session, still up over 0.20% for the day.

GBPUSD SIGNAL : Expectations that an economic downturn would force the Fed to slow the pace of its policy tightening failed to assist the US dollar to capitalize on the overnight strong move up. Apart from this, a goodish recovery in the equity markets undermined the safe-haven greenback, which, in turn, offered some support to the GBP/USD pair.

The British pound drew additional support from rising bets for a 50 bps rate hike move by the Bank of England at its upcoming policy meeting in August. That said, the UK politics and Brexit woes could act as a headwind for the GBP/USD pair. Investors might also prefer to wait for the outcome of a two-day FOMC monetary policy meeting.

The US central bank is scheduled to announce its decision later during the US session and is widely expected to raise interest rates by 75 bps to tame red-hot inflation. Market participants, however, remain divided over the need for more aggressive rate hikes amid the worsening economic outlook and growing recession fears.

GBPUSD SIGNAL : Hence, investors would closely scrutinize Fed Chair Jerome Powell’s comments at the post-meeting press conference for fresh clues about the near-term policy outlook. This, in turn, would play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the GBP/USD pair.

Heading into the key central bank event risk, traders would be looking upon the US economic docket – featuring the release of US Durable Goods Orders later during the early North American session. This, along with the broader market risk sentiment, could drive the USD demand and produce short-term opportunities around the GBP/USD pair.

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