The GBP/USD currency pair increases on Monday and gets close to a critical 200-day SMA support. It keeps going up during the first half of the European day. The pair is near its daily high of 1.2230, which is helped by the weakness of the US dollar.
As global risk sentiment gets better, as shown by the optimism in the stock market, the safe-haven dollar sells off. But a combination of things could stop traders from making aggressive negative bets on the USD and limit GBP/USD gains for now.
Even though China has eased restrictions on COVID-19, a big increase in new infections could slow the economy’s full reopening. This and the ongoing conflict between Russia and Ukraine could make the market less optimistic. The Fed’s hawkishness last week makes USD dip-buying more likely.
To stop inflation, the US central bank said that borrowing costs would have to go up by at least 75 bps by 2023. This increases US Treasury bonds’ yields, which helps USD bulls. GBP/USD bulls should be careful if they want to buy USD.
With fears of a recession, a Bank of England (BoE) meeting where two MPC members vote to keep interest rates the same could hurt the GBP.
Conclusion
This could lower the GBP/USD pair and show that spot prices will decrease if no important macroeconomic news comes out.