- GBP/USD appreciates more than 4% in a 10-day rally to hit three-month highs at 1.2800.
- The pound appreciates against a softer US dollar ahead of the Fed statement.
- GBP needs to confirm above 1.27560 to continue rallying – UOB.
The GBP/USD appreciated for the tenth consecutive day on Wednesday, buoyed by US dollar weakness amid market speculation of Fed easing ahead of the conclusion of June’s monetary policy meeting. The pair has gained more than 4% over these ten days, to reach 3-month highs at 1.2800 before trimming gains and pull back towards 1.2750 area
US dollar vulnerable ahead of the Fed statement
The greenback has headed south against its main rivals on Wednesday, amid speculation that the Fed would be looking to tame the bonds yield curve. The bank, which is widely expected to leave its benchmark rates unchanged at 0% – 0.25%, might announce measures to cap the recent rally on the 10-year government bonds.
Sterling’s rally, however, has remained weighed by a combination of factors with Brexit uncertainty being the main concern. Beyond that, the high death toll of the coronavirus disease in the UK and investors’ concerns that the BoE is considering the introduction of negative interest rates next year have prevented a stronger pound rally.
GBP/USD: 1.2760 is a key resistance level – UOB
FX Strategists at UOB Group warn that the pair should confirm above 1.2760 to extend its current rally, “GBP once again failed to break the 1.2760 resistance as it plummeted from a high of 1.2757 and hit a low of 1.2620 (before snapping higher). The rapid swings have resulted in a mixed outlook and GBP could continue to trade in a choppy manner for today. That said unless GBP can break 1.2760 and stay above this level, the risk of deep pullback would increase quickly.”
GBP/USD key levels to watch
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