Fast Retreat After Early Gain

The British pound and US dollar pair hiked up to a high point for the week in the vicinity of the 1.3080 to 1.3085 area in the course of the early European session; nevertheless, it was quick to retreat some pips after the stride. Before this report, the pair was seen trading just some pips over the daily low point in the region of 1.3055.

GBP/USD price chart. Source TradingView

The US dollar incidentally prolonged the sharp slide of retracement from the previous day, which was at its highest point since March of 2020. The US dollar equally saw a heavy wave of sales for the second day in a row on Wednesday. The positive tone that was broadly around the stock market was taken as a major factor that reduced financial inflows to the buck as a safe-haven asset, which then became the necessary aid that helped the GBP/USD currency pair draw considerable purchases to itself close to the region of 1.3040.

The increase, however, did not have a conviction from bullish traders in the midst of weaknesses that were driven by the cross and stemmed from a sharp increase in the EUR/GBP pair. While at that, a favorable increase in the US Treasury bond yield encouraged by the expectations of hawkish monetary policies from the US Federal Reserve is speculated to favorably act as a tailwind to the GBP/USD pair. This, of course, more than before, calls for caution on the side of traders before they stake heavy bullish wagers on the GBP/USD currency pair.

Powell’s Speech, Bailey’s Visit

As it is, the market appears so convinced that the US Federal Reserve is going ahead with tightening its monetary policy at a more rapid rate as a measure of fighting the exploding inflation rates in the US. The market has consequently been pricing in a number of 50 basis points in an interest rate increase from the Federal Reserve. More confirmation for the bets was given through comments that came from an array of top Federal Open Market Committee members as soon as the week began. Therefore, the market’s main focus will be on the speech expected to be delivered by the Chairman of the Federal Reserve, Jerome Powell, later in the American session.

Traders are also expected to look out for the appearance of the Governor of the Bank of England, Andrew Bailey, as he comes to Washington DC for an event as there are currently no relevant economic publications to expect from the United Kingdom.  

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