- GBP/USD falls off the highs set on Wednesday
- The FOMC minutes helped the dollar to rebound strongly.
- The traders will watch Brexit negotiations for any updates.
The better than expected UK inflation numbers on Wednesday had pushed the GBP/USD to touch 2020 highs. The July headline inflation clocked an increase of one Percent YoY, beating the market expectations as well as the June numbers. The confidence-boosting inflation numbers will allow the Bank of England to continue its present wait-and-watch policy approach.
The bulls’ joy was short-lived as the dollar surged in the US session on the back of the FOMC minutes of the meeting held on July 28-29. The details of the meeting revealed yesterday didn’t offer much for the dollar bears. There was only scant mention about the dovish framework for the coming months, and also, many Fed members opined that yield caps and targets wouldn’t be of much help in the current environment. The comments caused a sell-off in the Treasuries and thus pushed the yields higher. Higher US bond returns are generally bullish for the US dollar.
The dollar strength has pushed the GBP/USD into the bear territory now; after a 175-pips downtick, yesterday, dragged the pair below the 1.3100 area – near the lower end of its weekly range.
GBP/USD now waits for updates from the ongoing Brexit negotiations between the UK and EU, as there aren’t any significant UK economic releases due for the day. The pair has been trading in a narrow range in today’s Asian session.
In the US economic docket today, Philly Fed Manufacturing Index and Initial Weekly Jobless Claims are the highlights. Traders will be watching them along with broader market risk sentiment to scout for opportunities later in the day.