- Cable buyers retreat on the second day amid the Brexit and BoE chatter.
- DXY bulls hold on despite POTUS and Yellen’s support for the Fed.
- A busy US calendar can provide a fresh impetus for the pair.
GBP/USD fundamental forecast
At the London session, GBP/USD is hovering at 1.2596, with a 0.04% decrease so far.
Disagreements are weighing down GBP/USD over UK Prime Minister Boris Johnson’s party during the covid-led lockdowns and unhappiness among British corporate leaders over the Northern Ireland Protocol.
There are concerns about the Bank of England’s role in managing inflation. The governor of the Bank of England recently reacted to critics who accused him of being asleep at the wheel as inflation surged and a cost-of-living crisis-affected UK living standards.
According to Andrew Bailey, the nature of the shock means that increased interest rates may harm the economy, which regained slowly from the pandemic in 2021.
POTUS and Yellen support the Fed
Recently, US President Joe Biden complimented the US Federal Reserve’s (Fed) work in preventing price rises, followed by US Treasury Secretary Janet Yellen’s admission that she was mistaken about inflation.
Yellen said last year that she was “wrong” about the threat presented by growing inflation, but she insisted that Joe Biden’s government immediately focused on reducing surging prices.
Despite a drop from 102.17, the DXY had its first daily gain in four days in Tuesday’s trade. The US dollar index regained the previous day as markets hailed Fed Christopher Waller’s hawkish views and positive domestic data.
As investors evaluated growing global inflation and the likelihood of a slowdown in the economy, Treasury rates rose on Tuesday.
The yield on the 10-year Treasury note increased by 12 basis points to 2.87%, while the yield on the 30-year Treasury bond increased by 10.7 basis points to 3.08%.
Key data releases from the GBP
On the GBP docket, we had national housing prices, which were 11.2%.
Key data releases from the US
The US ISM Manufacturing PMI for May is predicted to be 54.5, up from 55.4 before, and the Fed speaks.
What’s next to watch for GBP/USD?
Brexit and monetary decisions from the Federal Reserve and the Bank of England are the main priorities for traders. In the middle of this, rising US rates and a probable hard landing of the US economy are all factors that continue to promote a stronger dollar.
GBP/USD technical analysis: in a downward trajectory?
GBP/USD has lost some ground today and has dropped 0.04% so far. The pair is way below its 100-day MA on the daily chart, and the RSI is around 50. GBP/USD is now hitting the 1.2596 level. A fall below 1.2582 will bring the pair towards the 1.2481 support level. If the pair dips below this level again, it will move to the next support level at 1.2400.
On the upside, the pair can go towards the next resistance level, around 1.2636. A break over 1.2713 will pave the way for a test of the following resistance level of 1.2844.