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GBP/USD witnessed a dramatic intraday turnaround from touching three-week highs on Tuesday.
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The risk-off mood and recession fears revive demand for the safe-haven USD and exert pressure.
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UK political drama weakened the British pound and contributed to the intraday pullback.
The GBP/USD pair is seen extending its intraday retracement slide from a three-week top touched earlier this Tuesday and continues losing ground through the mid-European session. The downward trajectory drags spot prices to a fresh daily low, around the 1.1970-1.1965 region in the last hour.
Investors remain concerned about a possible global recession, which is evident from a generally weaker tone around the equity markets. This is assisting the safe-haven US dollar to stage a goodish rebound from the vicinity of a multi-week low touched the previous day, which, in turn, is exerting downward pressure on the GBP/USD pair.
Moreover, UK politics is seen as another factor adding to the negative sentiment surrounding the British Pound and further contributing to the pair’s intra-day swings. A combination of factors, to a greater extent, overshadows the prospect of a 50 bps rate hike by the Bank of England at its upcoming meeting in August.
The global flight to safety, meanwhile, is triggering a fresh leg down in the US Treasury bond yields, which might cap gains for the USD and offer some support to the GBP/USD pair. Traders might also refrain from placing aggressive bets ahead of the highly-anticipated FOMC policy decision on Wednesday and heavyweight US macro data.
A rather busy week in terms of important US economic releases kick starts with the Conference Board’s Consumer Confidence Index on Tuesday. The focus, however, will remain on the outcome of a two-day FOMC meeting. The Fed is expected to hike interest rates by another 75 bps and leave the door open for further policy tightening.
This week’s US economic docket also features the release of Durable Goods Orders on Wednesday and the Advance Q2 GDP report on Thursday. Apart from this, the Personal Consumption Expenditures (PCE report) – the Fed’s preferred inflation gauge – due on Friday will influence the USD and provide a fresh impetus to the GBP/USD pair.
Technical levels to watch
GBP/USD
