GBP/USD flirts with yearly low, around mid-1.3300s amid Brexit woes/stronger USD
- GBP/USD remained under some selling pressure for the fourth consecutive day on Wednesday.
- Brexit woes continued weighing on the GBP and dragged the pair lower amid a fresh USD buying.
- Hawkish Fed acted as a tailwind for the USD, though retreating US bond yields capped the upside.
- Investors now look forward to the US economic data/FOMC minutes for some meaningful impetus.
The GBP/USD pair edged lower through the first half of the European session and dropped to mid-1.3300s in the last hour, back closer to a yearly low set in the previous day.
A combination of factors failed to assist the GBP/USD pair to capitalize on the overnight bounce from the 1.3340 area, or the lowest level since December 2020, instead prompted fresh selling on Wednesday. The impasse over the post-Brexit arrangement in Northern Ireland and fishing rights continued acting as a headwind for the British pound. This, along with the emergence of fresh buying around the US dollar, dragged the pair lower for the fourth successive day.
The greenback shot to a fresh 16-month peak and remained well supported by growing acceptance for an early policy tightening by the Fed, reinforced by Jerome Powell's renomination as the Fed chair. Persistent concerns about rising inflationary pressures forced investors to price in the possibility for an eventual Fed rate hike move by July 2022. That said, retreating US Treasury bond yields could turn out to be the only factor capping gains for the USD.
Nevertheless, the GBP/USD pair, so far, has struggled to gain any meaningful traction, suggesting that an imminent Bank of England interest rate hike in December is fully priced in the markets. This, in turn, favours bearish traders and supports prospects for an extension of the recent decline from levels just above the key 1.3500 psychological mark. However, bearish traders are likely to wait for acceptance below mid-1.3300s before placing fresh bets.
Market participants now look forward to the US economic docket, highlighting the releases of the Prelim (second estimate) US Q3 GDP, Durable Goods Orders and Core PCE Price Index. This, along with the FOMC meeting minutes, will drive the USD demand and provide a fresh impetus to the GBP/USD pair. Apart from this, Brexit-related headlines should influence the GBP price dynamics and allow traders to grab some short-term opportunities.
Technical levels to watch