GBP/USD retraces below 1.2800 on a strong USD, ahead of Powell testimony, BoE’s decision – by christianborjon GBPUSD Currencies Majors
ar . Expectations for additional tightening by the US Federal Reserve and an “overbought” US equity market dampened investors’ mood. At the time of writing, the GBP/USD is trading at 1.2755 after hitting a high of 1.2806.
Potential for further tightening by US Federal Reserve and overbought US equity market affecting GBP/USD In the last week, the Fed held rates unchanged at their June monetary policy but upward revised peak rates at 5.6%, according to the dot plots. That strengthened the US Dollar, which was hurt by Fed Chair, who struck a neutral tone, disappointing USD bulls, so the GBP/USD continued towards its YTD high. But last Friday, hawkish comments by Fed Governor Christopher Waller and Thomas Barkin weighed on traders after Monday’s holiday in the US.
Notably, the CME FedWatch Tool shows traders seeing a 74% chance of a 25 bps increase to the Federal Funds Rate in June, but toward the end of the year, money markets do not believe the Fed would raise rates any further the 5.25%-5.50% area. Meanwhile, Fed Chair Jerome Powell’s testimony at the US Congress on Wednesday and Thursday is expected to keep the press conference tone. Any hawkish surprises could bolster the greenback, while dovish hints could damage the already batteredAside from this, the Bank of England is expected to raise rates on Thursday, with markets pricing in a 25 bps hike.
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