GBP/USD is recovering from a one-and-a-half-week low, helped by hopes for a US-Iran settlement and the Bank of England's hawkish stance. A strong dollar and expectations of a December Fed rate hike limit the gains. Technically, the pair stays within a downward structure.
GBP/USD rose moderately on Wednesday, moving away from a low around 1.3300. The pair recovered to 1.3346, but further upside remains very limited.
Diplomacy and the Bank of England support sterling
Hopes for a diplomatic settlement of the US-Iran conflict support the pound by reducing demand for the dollar as a safe-haven asset. US Secretary of State Marco Rubio stated that large-scale military operations against Iran are not currently necessary.
The Bank of England's hawkish stance is another positive factor. The central bank warns that second-round inflationary effects may require further rate increases, which widens the divergence in monetary policy expectations.
Fed hike expectations back the dollar
Strong US inflation data have again increased expectations of a Fed rate hike in December. Some Fed officials, including Christopher Waller, have acknowledged the possibility of a 50-basis-point rate hike if core inflation continues to exert pressure. Waller also stressed that the current rate level may not be restrictive enough.
Sellers keep the technical edge
On the H4 chart, GBP/USD formed a downward structure after rising to 1.3503. The price remains below the nearest resistance at 1.3389, and a sequence of lower highs indicates that sellers retain the advantage.
A close below 1.3318 would open the way for a decline towards 1.3285, with 1.3188 and 1.3137 as the next targets on a longer time horizon. In the alternative scenario, consolidation above 1.3354 would point to a recovery towards 1.3389, and a break above that resistance would bring 1.3457 back into focus.
Source: ActionForex
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