GBP/USD Price Recovery Stalls at 1.34 amid Brexit, Awaits US Data
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- GBP/USD price remains slightly positive on the day.
- Strong US inflation signals that Fed can hike rates sooner than later.
- Looming Brexit concerns are also weighing on the pound.
The GBP/USD price re-established its daily highs during the mid-European session, but it failed to sustain them and stayed below the 1.3400 level.
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With a modest rebound from its lowest since December 2020, the pair has found some support near the mid-1.3300, ending a three-day losing streak. After hitting 16-month highs, the US dollar saw some profit-taking, which bolstered the GBP/USD pair. Despite this, meaningful recovery still seems impossible and attempts to recover from risk failure fairly quickly.
Market expectations that the Fed will be forced to hike rates sooner rather than later are confirmed by the US consumer inflation data released on Wednesday, higher than expected. According to Fed fund futures, the first-rate hike could occur as early as July 2022. Along with higher US Treasury bond yields, this should help deter bulls from chasing aggressive rates around the GBP/USD amid Brexit issues.
It has been threatened that the suspension of the Northern Irish part of the Brexit deal is very important. Alternatively, if Great Britain introduces Article 16, the EU is preparing a response package. It’s expected that both sides will begin new talks on Friday to avoid a trade war. In addition, the Bank of England’s dovish-like decision last week could encourage further collaboration to cap significant gains for the pound sterling.
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To confirm the recent pullback of the very important 200-day SMA has been exhausted, it is wise to wait for strong follow-up buying. However, Jonathan Haskell’s planned performance is now expected to provide some impetus to market participants. Furthermore, during the North American session, the Prelim Michigan Consumer Sentiment Index could influence the US dollar’s price action and create trading opportunities for the GBP/USD pair.
GBP/USD price technical analysis: Weak upside correction
The GBP/USD price found a bottom around the mid-1.3300 area and bounced to a 1.3400 handle. However, the upside lacks follow-through momentum. The volume for the last 4-hour bar is below average. We may expect a rejection around the 1.3440 area. On the downside, 1.3350 will be the key support ahead of 1.3300.
