The GBP/USD currency pair went up again for the second day on Thursday after a moderate bounce overnight from 1.1800, its lowest level since November. During the early part of the European session, the pair kept a moderately optimistic tone and traded above the mid-1.1800s. However, any significant gains are still hard to come by.

After the recent strong run-up to almost a three-month high, the US dollar (USD) bulls are taking a break. This is a big reason to support the GBP/USD pair. So, the possibility that the Federal Reserve (Fed) will tighten its policies more aggressively, along with fears of an upcoming recession, gives the safe-haven Greenback a boost and should limit gains for the major, at least for now.

The markets are now pricing in a higher chance of a vast 50-bps rate hike at the next FOMC meeting on March 21-22. The bets went up after Fed Chair Jerome Powell said, in a hawkish way, that interest rates would have to go up and probably go up faster to stop inflation from staying high. This helps the US dollar bulls because it keeps the yields on US Treasury bonds high.

In the meantime, the mood on the market is still not very good, and worries about economic headwinds caused by quickly rising borrowing costs are growing. Aside from this, investors’ lack of confidence in quick economic recovery in China dampens their enthusiasm for what they see as riskier assets. This is shown by a weaker tone around the equity markets and supports the bullish forecast for the Greenback shortly. So, any move up after that could still be seen as an opportunity to sell.

Trading Ideas:

Traders are now looking to the US macro data, such as Challenger Job Cuts and the typical Weekly Initial Jobless Claims, for a new push and short-term opportunities.