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  • GBP/USD gained positive traction on Wednesday and moved further away from one-month lows.
  • A subdued USD demand and hotter-than-expected UK CPI figures provided a modest lift to the pair.
  • Brexit/COVID-19 woes kept a lid on any further gains ahead of the highly-anticipated FOMC decision.

The GBP/USD pair refreshed daily tops in reaction to mostly upbeat UK macro data, with bulls now awaiting a sustained move beyond the 1.4100 mark.

The pair built on the previous day’s goodish rebound from the 1.4035-30 region, or one-month lows and gained some positive traction through the first half of the trading action on Wednesday. A subdued US dollar demand was seen as a key factor that extended some support to the GBP/USD pair, which got an additional boost following the release of hotter-than-expected UK inflation figures.

According to the data published by the UK Office for National Statistics (ONS), the headline UK CPI held steady at 0.6% MoM in May and accelerated 2.1% on a yearly basis from 1.5% YoY registered in the previous month. Excluding volatile food and energy items, the Core CPI rose 2.0% YoY during the reported month versus consensus estimates for a reading of 1.5% and 1.3% recorded in April.

Barring the immediate reaction, the GBP/USD pair, so far, lacked any strong follow-through buying. Concerns about the EU-UK stand-off on the Northern Ireland protocol and the UK government’s decision to delay the final stage of easing lockdown measures acted as a headwind for the British pound. Investors also seemed reluctant to place any aggressive bets ahead of the key FOMC decision.

The latest monetary policy update by the Fed will be closely scrutinized for clues about a possible change in the policy outlook and if members have started the discussion to taper the current $120 billion in monthly bond purchases. This will play a key role in influencing the greenback in the near-term and provide a fresh directional impetus to the GBP/USD pair.

Technical levels to watch