- During the European session, the GBP/USD exchange rate rose above 1.2250.
- If the price can hold over 1.2270, the pair may move higher.
- In the event that US markets extend their gains from Friday, the US Dollar may continue to struggle.
In the early hours of Tuesday morning in Europe, GBP/USD has gained momentum after a subdued Asian session on Monday. On Monday, risk sentiment may assist the pair go higher, and technical buying pressure may increase until 1.2270 is confirmed as support.
Following the policy meetings last week, market positioning indicates that there is a 50% likelihood of the Bank of England (BOE) and a 70% chance of the US Federal Reserve holding rates constant at the following policy meeting, respectively. Pound Sterling outperforms the US Dollar in futures prices, at least temporarily (USD).
Additionally, the USD finds it challenging to gain strength due to the positive shift in risk sentiment that has been observed. The main indexes on Wall Street managed to close in positive territory on Friday despite major European equity indexes losing ground due to a sharp decline in banking stocks.
US stock index futures were up between 0.4% and 0.6% as of the time of writing. GBP/USD may keep steady in the afternoon if US markets continue their upward trend from Friday.
Later in the day, BOE Governor Andrew Bailey is scheduled to make a statement. The risk of a recession in 2023 has decreased “quite a lot,” Bailey said in an interview with BBC on Friday, adding that there is evidence of good progress on inflation.
The US economic docket will include data for March from the Dallas Fed Manufacturing Index. However, rather than this information, market participants are more likely to respond to shifts in risk sentiment.
It is also difficult for the USD to strengthen due to the positive shift in risk sentiment that has been observed. Despite a strong collapse in banking equities on Friday that hurt major European market indexes, Wall Street’s key indexes were able to close the day in the black in advance of the weekend.
Futures for US stock indexes were up 0.4% to 0.6% as of the time of writing. The GBP/USD pair may maintain its current level in the afternoon if US markets continue their upward trend from Friday.
Later in the day, Governor of the BOE Andrew Bailey is set to address. Bailey told BBC on Friday that there is “signs of promising progress on inflation, but we have to be careful” and noted that the likelihood of a recession in 2023 has decreased “quite a lot.”
Data for the March Dallas Fed Manufacturing Index will be presented in the US economic docket. In contrast, market participants are more likely to respond to shifts in risk sentiment than to this data.