GBP/USD under pressure by expected Fed’s aggressiveness

GBP/USD under pressure by expected Fed’s aggressiveness
The GBP/USD is attempting to recover after diving to fresh February lows around 1.1914 in the mid-US session, boosted by the weaker US dollar. The pair is trading below the important 200-day Exponential Moving Average (EMA) at 1.2132, keeping the downtrend intact. At the time of writing, the GBP/USD is exchanging hands above the 1.2039, above its opening price by 0.30%.

Data from the United States and the United Kingdom kept the pair under pressure, which finally dropped below the 200-day EMA. The UK inflation report on Tuesday contributed to speculations that the BoE would not hike rates as aggressively as expected.

Softer than expected Consumer Price Index (CPI) for January in the United States, which exceeded estimates by bank analysts, incremented the likelihood of further tightening by the US Fed.

The Producer Price Index (PPI) for January impacted both US Treasury bond yields and the dollar, with data coming higher than estimates on a monthly basis. That spurred hawkish commentary by two Fed officials, who said that rates need to be higher for longer, foreseeing them above the 5.0% threshold.

Another factor that influenced investors’ reaction was the Philadelphia Fed Manufacturing Index, which collapsed, but comments in the poll by business executives commented that input prices jumped for the first time in 10 months. Given the backdrop, money market futures are pricing in a more hawkish Federal Reserve.

Therefore, the GBP/USD extended its losses on Thursday, dropping 0.26%. But as the New York session progresses, the Pound Sterling (GBP) has gained traction against the US Dollar (USD), setting the stage to challenge the 100-day EMA.

The GBP/USD pair daily chart portrays the pair as downward biased, even though it’s recovering from falling for two straight days. The major found buyers around the 1.1900 area, which triggered an uptick to the day’s high at 1.2037, the 100-day EMA, where the GBP/USD was quickly rejected.

If the GBP/USD achieves a daily close above the 100-day EMA, the pair will rally toward the confluence of the 200 and 20-day EMAs, each at 1.2132/35, respectively. On the other hand, a bearish resumption could happen once the GBP/USD tumbles below 1.1914, followed by the 1.1900 figure.