- GBP/USD drifts into negative territory for the second successive day on Tuesday.
- The USD attracts haven flows amid looming recession risks and exerts pressure.
- Expectations that the BoE will continue raising rates should limit deeper losses.
The GBP/USD pair attracts some sellers following an early uptick to the 1.2415 area and turns lower for the second successive day on Tuesday. Spot prices retreat further from the highest level since June 2022 touched on Monday and drop to the 1.2300 round-figure mark, or a four-day low during the first half of the European session.
The US Dollar stages a modest recovery from a nine-month low and turns out to be a key factor exerting some downward pressure on the GBP/USD pair. The market sentiment remains fragile amid worries about the economic headwinds stemming from the worst yet COVID-19 outbreak in China. Furthermore, the protracted Russia-Ukraine war has been fueling recession fears. This, in turn, tempers investors' appetite for riskier assets and drives some haven flows towards traditional safe-haven assets, including the buck.
The British Pound, on the other hand, is pressured by weaker PMI prints, which showed that business activity in both manufacturing and services sectors contracted in January. However, speculations that elevated consumer inflation will maintain pressure on the Bank of England (BoE) to continue raising interest rates could lend some support to the Sterling. Apart from this, rising bets for a smaller 25 bps Fed rate hike in February might cap the USD and help limit deeper losses for the GBP/USD pair.
Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped out in the near term and positioning for any meaningful corrective decline. Traders now look forward to the US economic docket, featuring the release of the flash PMI prints and the Richmond Manufacturing Index. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD rebounds from session lows, stays below 1.0600
EUR/USD recovers from the session low it set in the European session but remains below 1.0600 on Tuesday. Although the US Dollar struggles to gather strength following disappointing housing data, the risk-averse market atmosphere caps the pair's rebound.
GBP/USD remains under pressure below 1.2650 after BoE Governor Bailey testimony
GBP/USD trades in the red below 1.2650 on Tuesday, pressured by safe-haven flows. BoE Governor Bailey said a gradual approach to removing policy restraint will help them observe risks to the inflation outlook but this comment failed to boost Pound Sterling.
Gold remains propped up by geopolitics
Gold retreats slightly from the daily high it touched near $2,640 but holds comfortably above $2,600. Escalating geopolitical tensions on latest developments surrounding the Russia-Ukraine conflict and the pullback seen in US yields help XAU/USD hold its ground.
Bitcoin Price Forecast: Will BTC reach $100K this week?
Bitcoin (BTC) edges higher and trades at around $91,600 at the time of writing on Tuesday while consolidating between $87,000 and $93,000 after reaching a new all-time high (ATH) of $93,265 last week.
How could Trump’s Treasury Secretary selection influence Bitcoin?
Bitcoin remained upbeat above $91,000 on Tuesday, with Trump’s cabinet appointments in focus and after MicroStrategy purchases being more tokens.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.