The GBP/USD pair struggles to capitalize on its modest intraday uptick and trades with a negative bias through Tuesday’s first half of the European session. The pair is currently placed just above the mid-1.2100s, down over 0.15% for the day, and for now, seems to have snapped a four-day winning streak to a one-month peak, around the 1.2200 mark touched on Monday.
The British Pound did get a minor lift following the release of the UK monthly employment details, reaffirming bets for additional rate hikes by the Bank of England (BoE) later this month. That said, resurgent US Dollar (USD) demand, bolstered by a goodish pickup in the US Treasury bond yields, turns out to be a key factor forcing the GBP/USD pair to erode a part of the previous day’s substantial gains.
The Federal Reserve moved to limit the fallout from the sudden collapse of Silicon Valley Bank (SVB). It announced on Sunday that it would make additional funding available to eligible depository institutions to help assure banks can meet the needs of all their depositors. This, in turn, helps ease fears of a broader systemic crisis and pushes the US bond yields higher across the board.
The strong intraday USD rally could be attributed to some repositioning trade ahead of the release of the crucial US consumer inflation figures, due later during the early North American session. However, speculations that the Fed could slow, if not halt, its rate-hiking cycle amid the strain on the US banking system might cap any meaningful upside for the USD and lend some support to the GBP/USD pair.
Traders might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the critical central bank event risks – the FOMC decision on Wednesday, followed by the BoE meeting next week. This further makes it prudent to wait for solid follow-through buying before confirming that the GBP/USD pair’s recent recovery from the 1.1800 mark, or the YTD low touched last week, has run its course.