- GBP/USD struggles to gain any meaningful traction and oscillates in a range on Wednesday.
- The emergence of fresh USD buying acts as a headwind amid a bleak UK economic outlook.
- Investors now look forward to US Durable Goods Orders data for short-term opportunities.
The GBP/USD pair lacks a firm intraday direction and seesaws between tepid gains/minor losses through the early part of the European session on Wednesday. Spot prices, however, manage to hold above the 1.1800 round-figure mark, around the previous day's closing level.
The US dollar regains some positive traction and moves further away from the weekly low touched in reaction to the dismal US PMI prints on Tuesday. Expectations that the Fed would stick to its policy tightening path to tame inflation continue to underpin the buck, which, in turn, acts as a headwind for the GBP/USD pair.
In fact, the markets are still pricing in at least a 50 bps Fed rate hike move at the September policy meeting. This remains supportive of elevated US Treasury bond yields, which, along with the prevalent risk-off environment amid growing worries about a global economic downturn, offers additional support to the safe-haven greenback.
The British pound, on the other hand, draws some support from the prospects for a 50 bps rate hike by the Bank of England in September. This, in turn, helps offset the negative factors and limits the downside for the GBP/USD pair. That said, rising concerns over the UK cost of living crisis and recession fears seem to cap gains.
Market participants also seem reluctant to place aggressive bets ahead of Fed Chair Jerome Powell's appearance at the Jackson Hole symposium on Friday. Powell's remarks will be scrutinized for clues about the possibility of a supersized 75 bps rate hike in September, which will influence the USD and provide a fresh impetus to the GBP/USD pair.
In the meantime, traders on Wednesday will take cues from the US economic docket – featuring Durable Goods Orders and Pending Home Sales data later during the early North American session. This, along with the US bond yields, might drive the USD demand. Apart from this, the broader risk sentiment could produce short-term opportunities around the GBP/USD pair.
