The GBP/USD currency pair bears took a respite following Fed-inspired losses as traders prepare for the Bank of England’s (BOE) monetary policy decision on Thursday. The lack of big catalysts during the first Asian session may also limit Cable’s quick gains.
The price plummeted after the Fed announced a 75-bps rate hike. The Fed’s action was the third of its kind, as it attempts to ease inflation fears despite “below-trend growth” and a deteriorating job market. Fed Chairman Jerome Powell said taming inflation won’t be easy. While the Fed met market estimates, economic uncertainties around the rate hikes and prospects of another 0.75% increase in November kept the US Dollar on the front foot despite severe volatility.
The UK Company Department said it would cap business power and gas costs on Wednesday. Reuters reported that British Prime Minister Liz Truss said they would introduce low-tax investment zones. UK PM Truss also said they’re willing to negotiate a trade deal when the US is ready.
Wall Street concluded the day on a sad note, and US Treasury yields fell as investors sought shelter.
The GBP/USD pair’s traders will watch the BOE as the “Old Lady” is anticipated to raise rates by 50 bps on inflation fears. The BOE’s peers from the US, Sweden, and Brazil recently announced a 0.75% rate increase, and the central bank is under pressure to take a big move, even if the latest UK statistics don’t support the claim. This suggests a positive surprise from the British central bank and a corrective bounce of the Cable.
The GBP/USD had a turbulent week characterized by aggressive Fed predictions and top-tier economic data.