The GBP/USD pair attracted buyers during the Asian session on Tuesday, appearing to end a five-day losing streak that brought it to a nearly four-week low around 1.3060. However, spot prices are struggling to maintain momentum beyond the 1.3100 level, suggesting caution among bullish traders.
The US Dollar (USD) remains under pressure after reaching a seven-week high on Friday, which provides some support to the GBP/USD pair. Nonetheless, diminished expectations for significant interest rate cuts by the Federal Reserve, amid signs of a resilient US labor market, may prevent aggressive bearish bets against the USD. Additionally, a softer risk sentiment could bolster the safe-haven appeal of the USD, further capping the upside for the currency pair.
Investor concerns about escalating tensions in the Middle East have dampened market sentiment. Compounding this, less optimistic remarks from China’s National Development and Reform Commission (NDRC) have tempered recent enthusiasm surrounding Chinese stimulus efforts, leading to a generally weaker tone in equity markets. This dynamic may drive haven flows toward the USD, limiting gains for the GBP/USD pair.
Comments from Bank of England (BoE) Governor Andrew Bailey last week indicated a potential for more aggressive rate cuts if inflation improves further. This outlook could also hinder the British Pound (GBP), suggesting that the path of least resistance for the GBP/USD pair may be downward. As a result, any further upward movement could be viewed as a selling opportunity that may quickly lose momentum.
Looking ahead, no significant economic data is scheduled for release on Tuesday from either the UK or the US, leaving the GBP/USD pair susceptible to comments from Federal Reserve officials. Market attention will shift to the release of the FOMC meeting minutes on Wednesday, followed by key US inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), which will likely influence USD demand and provide fresh momentum for the currency pair.
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