After two days of decline, the British pound continues to trade at a discount to the US dollar, currently at 1.2350 as of early Tuesday morning in Asia. As market sentiment deteriorates ahead of the key data/events, the Cable pair follows the broad US Dollar rebound for guidance. The UK’s economic problems and challenges may lend credence to the quotations from the crucial 1.2450 barrier.
The British pound has been under pressure from the US dollar because of UK Treasury Secretary Jeremy Hunt’s indecision regarding tax cuts and the economic complications caused by workers’ strikes. Although higher inflation and decreased productivity result from workers’ refusal to continue their work, policymakers propose fighting inflation as a solution.
When compared to that, the Dallas Fed manufacturing index in the United States increased by 11.6 points in January to a reading of -8.4, the highest level seen since May 2022.
GBP/USD prices were dragged down by a combination of weak US data, rising US Treasury bond yields, and falling equities. Even though stock market indices ended the day in the red, 10-year US Treasury bond yields rose 2.4 basis points (bps) to 3.542 percent.
Note that risk aversion and the GBP/USD exchange rate were both negatively affected by traders receiving conflicting information about China’s economic transition after the country returned from its week-long Lunar New Year (LNY) holiday.
After a slow start to the crucial week that has largely favoured GBP/USD bears, today’s release of the US Conference Board Consumer Confidence gauge for January will be closely watched by the pair’s traders. The Employment Price Index for Q4 will also be crucial (ECI). However, with the upcoming monetary policy meeting between the US Federal Reserve (Fed) and the Bank of England (BoE), today may be a busier day than yesterday for the Cable pair, although traders may remain cautious.