Ella 
In the Asian market on Monday, GBP/USD continued to struggle, failing to gain significant momentum, and fluctuated in the trading range near the 1.2100 mark for many days. Risks for key central bank events this week – ahead of Wednesday’s high-profile Federal Reserve decision and Thursday’s Bank of England (BOE) meeting, traders now appear to be inactive and more inclined to wait and see.
The Fed is expected to maintain the status quo, keeping interest rates unchanged for the second consecutive month in November, but markets still see the possibility of a rate hike later this year. The latest relatively optimistic U.S. economic data has once again confirmed this prediction. These data show that the U.S. economy is still full of vitality. Additionally, a stronger-than-expected increase in spending reported by the Commerce Department on Friday, as well as a rise in a monthly measure of inflation, should allow the Fed to maintain its hawkish stance. Rising U.S. bond yields are still supportive of the outlook, which will continue to be a tailwind for the U.S. dollar (USD) and put pressure on GBP/USD.
On the other hand, the market is increasingly worried about an economic recession, and the Bank of England (BoE) is also expected to maintain the benchmark interest rate at a 15-year high of 5.25%. However, the Bank of England is unlikely to relax its stance on high levels of inflation and may keep the door open to further tightening. This uncertainty has therefore prevented traders from making aggressive directional bets on the pound and has kept GBP/USD range-bound. Meanwhile, the lack of buying interest in GBP/USD suggests that downside resistance to GBP/USD remains minimal. However, bears will need to wait for a break below the 1.2100 mark before initiating positions.
Looking ahead, neither the UK nor the US will release important market economic data on Monday. Therefore, U.S. bond yields will continue to play a key role in U.S. dollar price dynamics and create short-term GBP/USD trading opportunities. Beyond this, traders will further take cues from broader risk sentiment, which tends to drive demand for the safe-haven dollar. However, based on the above fundamental background, investors should exercise caution before placing bets in new directions.
