GBP/USD benefits from the tightening cycle

The Pound Sterling is leaning against a critical level of support while the US dollar is surprisingly weak. The Federal Reserve and Bank of England’s rate decisions are being digested.

The GBP/USD pair is 0.2% higher at the time of writing on the first day of the trading week. However, the Pound Sterling is essentially consolidating a move from the potential peak of the current bullish cycle that met highs in the 1.2450s ahead of the Fed and BoE interest rate decisions last week.

The GBP/USD has since tumbled to a 1.2120 structure low and on Monday it has travelled between a low of 1.2168 and a high of 1.2241 so far.

Overall, the US dollar has been softer over the last two full trading days due to an improved appetite for risk despite the prospects of recessions and higher interest rates to be set by hawkish central banks.

World stocks have steadied near six-week lows on Monday after the Federal Reserve maintained a hawkish outlook on interest rates at the December Federal Open Market Committee (FOMC) meeting, pushing the outlook that rates could remain firmer for longer.