GBP/USD consolidates below 1.2100 mark, seems vulnerable near multi-month low
|- GBP/USD remains confined in a narrow range near its lowest level since March set on Tuesday.
- Bets for more Fed rate hikes, surging US bond yields and a weaker risk tone underpin the USD.
- The BoE’s surprise on-hold decision continues to weigh on the GBP and contributes to capping.
The GBP/USD pair extends its consolidative price move for the second successive day on Wednesday and remains well within the striking distance of the lowest level since March 16 touched the previous day. Spot prices trade below the 1.2100 mark during the Asian session and seem vulnerable to prolonging a nearly three-month-old downtrend from a 15-month peak set in July.
The US Dollar (USD) stands tall near a 10-month high in the wake of the Federal Reserve's (Fed) hawkish view and turns out to be a key factor acting as a headwind for the GBP/USD pair. Investors seem convinced that the US central bank will continue to tighten its monetary policy and keep interest rates higher for longer. Moreover, several Fed officials recently backed the case for at least one more rate hike by the year-end to bring inflation back to the 2% target.
Adding to this, the latest monthly JOLTS report showed that there were an estimated 9.61 million open jobs in August, marking a sizeable uptick from the previous month's upwardly revised reading of 8.92 million openings. The data suggested that wage inflation may be back on the agenda, which might force the Fed to extend the rate-hiking cycle into 2024. This pushes the yield on the benchmark 10-year US government bond to a fresh 16-peak and underpins the USD.
Meanwhile, the prolonged selloff in the US fixed-income market adds to concerns about economic headwinds stemming from rapidly rising borrowing costs. This, in turn, tempers investors' appetite for riskier assets and turns out to be another factor that benefits the safe-haven Greenback. Furthermore, the Bank of England's (BoE) surprise on-hold decision in September continues to weigh on the British Pound (GBP) and contributes to capping the GBP/USD pair.
The aforementioned fundamental backdrop seems tilted firmly in favour of bearish traders, though the oversold Relative Strength Index (RSI) on the daily chart warrants caution before positioning for any further losses. Market participants now look to the final UK Services PMI for fresh imputes ahead of the US macro data – the ADP report on private-sector employment and the ISM Services PMI – later during the early North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.