GBP/USD resists welcoming bears above 1.2200, UK inflation, Brexit vote and Fed eyed
|- GBP/USD picks up bids to reverse the first daily negative close in four, grinds higher of late.
- Improvement in market sentiment, US Treasury bond yields allow US Dollar to stabilize near multi-day low.
- Mixed concerns over Brexit deal’s acceptance, hawkish Fed bets tease sellers.
- UK inflation data for February will be the key ahead of “Super Thursday”.
GBP/USD stays defensive around 1.2220-10 as the Cable bears struggle to keep the reins after entering the ring for the first time in four days. Also challenging the quote could be the market’s cautious mood ahead of the key data/events as the Federal Reserve (Fed) decision data begins.
The Cable pair’s latest losses could be linked to the improvement in the market’s sentiment and a rebound in the US Treasury bond yields that allowed the US Dollar to pro recent south-run at the five-week low.
Behind the moves could be the comments from the US policymakers, as well as actions, to tame the fears emanating from the latest banking fallouts.
Among them, US Treasury Secretary Janet Yellen’s comments gained major attention as she said, "Treasury, Fed, FDIC actions reduced risk of further bank failures that would have imposed losses on deposit insurance fund." Earlier on Tuesday, Bloomberg shared the news stating that the “US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.”
Amid these plays, the benchmark Wall Street indices closed with more than 1.0% daily gains each whereas the US 10-year and two-year Treasury bond yields stretched late Monday’s bounce off the lowest levels since September 2022 to 3.60% and 4.18% respectively.
Looking ahead, the GBP/USD pair appears more interesting to watch as Brexit voting in the UK’s House of Commons will be crucial amid recent rejections from the European Research Group (ERG) and the Democratic Unionist party (DUP).
Also important will be the UK’s Consumer Price Index (CPI) data for February, expected 9.8% YoY versus 10.1% prior, as the same could hint at the Bank of England’s (BoE) action on the “Super Thursday”.
Above all, the Federal Reserve’s (Fed) reaction to the banking crisis will be crucial to watch for clear directions as the 0.25% rate hike is already priced in.
Also read: Federal Reserve Preview: Powell to persevere and raise rates, US Dollar set to (temporarily) rise
Technical analysis
A four-month-old horizontal resistance area surrounding 1.2270-90 challenges the GBP/USD bulls cheering a sustained break of the 50-DMA hurdle surrounding 1.2145.
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.