GBP/USD Outlook: Bulls Retreat from 4-Month Top After Hawkish FOMC

• Dollar strength, sparked by the Hawkish FOMC protocol, pushed GBP/USD down from nearly two-month highs.
• In addition to strengthening the dollar’s safe-haven status, risk aversion also fueled the sale of the US dollar.
• To regain momentum, the market awaits the final UK services PMI and US macro data.

Following the previous day’s correction to 1.3600, or near a two-month high, the GBP/USD outlook fell in the first half of Thursday’s trading. Recently, the pair flirted with daily lows in the 1.3520-25 region in the early European session.

In the meeting minutes from December 14-15, the FOMC pointed to a faster-than-expected increase in interest rates. As a result, participants almost unanimously agreed that it would make sense to calculate the balance after the initial increase. However, the US dollar continued to be supported by policymakers’ sharp shift in tone, which led to a selloff in the GBP/USD pair.

-Do you need a reliable forex signal UK? Check out for more details-

During this period, the market estimated an 80% chance of a rate hike by March 2022. In conjunction with concerns about the proliferation of the Omicron variant, this triggered a sharp decline in equity markets. The risk aversion impulse contributed to the dollar’s safe-haven status and further pressured the GBP/USD pair.

A rate hike due to further monetary tightening by the Bank of England could help the pound as long as the Omicron outbreak doesn’t undermine the UK economy. Meanwhile, the worsening COVID-19 situation in the UK could be a headwind for the pound sterling. In light of the mixed fundamentals backdrop, aggressive traders should exercise caution before positioning themselves for a solid short-term direction for GBP/USD.

Currently, the market is eagerly awaiting the final UK Services PMI release, which will provide momentum. Later in the North American trading session, traders will use the weekly US jobless claims and ISM Services PMI. At the same time, US bond yields and general market sentiment can affect the dynamics of dollar prices and provide some trading opportunities for the GBP/USD pair.

GBP/USD price technical outlook: Bears to tear 1.3500

The GBP/USD price has dipped more than 80 pips, wobbling around the 20-period SMA on the 4-hour chart. However, the bearish bias is so strong that 20-period SMA will not hold for long. Meanwhile, the next support emerges at 1.3500 ahead of 50-period SMA at 1.3475.

-Are you looking for the best copy trading UK platform? Check out our detailed guide-

Alternatively, if the price sustains above the 1.3500 level, we may see some pullback towards 1.3550 ahead of 1.3600.