- GBP/USD is oscillating below 1.2600 as investors are seeing forward to rate hike announcements.
- The Fed is going to elevate its interest rate by 50 bps.
- A 25 bps rate hike is expected by the BOE.
The GBP/USD pair is hovering around 1.2580 and is likely to extend further amid a rebound in the risk-sensitive currencies, witnessed on Friday. The cable attracted significant bids around 1.2510 as responsive buyers found it a value bet and drove it higher. The asset is expected to deliver wild moves this week as the market participants are awaiting the announcement of the interest rate hike by the Federal Reserve (Fed) and Bank of England (BOE) this week.
The Fed is going to bring tremendous uncertainty in the FX domain amid its dominance and expectation of a jumbo rate hike. Multi-decade inflation print at 8.5% and consistency in full-employment levels are advocating a 50 basis point (bps) interest rate hike from Fed policymakers. Along with the hawkish tone on rate announcements, hawkish guidance from the Fed is also expected to contain the inflation mess.
On the sterling front, the Bank of England (BOE) is going to continue the streak of raising interest rates. The BOE elevated its rates in its last meet by 50 bps. This time a similar extent is not expected as the street is forecasting a quarter to a percent rate hike but the streak of hiking the rates will continue to remain intact.
Although interest rate decisions from the Fed and BOE will remain in the spotlight this week, investors will also focus on the US Manufacturing PMI, which is due in the New York session. A preliminary reading for the ISM Manufacturing PMI is 58 against the prior print of 57.1.
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