Ella 
GBP/USD traded lower during the Asian session on Tuesday, reversing some of the previous day’s strong gains of more than 85 points from levels below 1.2100. GBP/USD is currently trading around 1.2155, down just over 0.10% on the day, and is within a range that has ranged around the past week.
Traders appear less inclined to make aggressive directional bets, preferring to stay on the sidelines ahead of key central bank event risks this week – Wednesday’s Federal Reserve interest rate decision and Thursday’s Bank of England (BOE) meeting. At the same time, expectations that the Federal Reserve (FED) will stick to its hawkish stance still support rising U.S. bond yields and help revive demand for the U.S. dollar (USD), which in turn puts some pressure on GBP/USD.
The U.S. economy remains resilient and inflation continues, providing the Federal Reserve with room to maintain higher interest rates for a longer period of time. In fact, the market still believes that the Fed is likely to raise interest rates again before the end of this year. In contrast, the Bank of England is expected to keep its benchmark interest rate at a 15-year high of 5.25% for the second consecutive time in a bid to boost the flagging economy. This thus in turn favors bearish traders and suggests that the path of least resistance for the GBP/USD pair is to the downside.
Looking ahead, there will be no important UK data releases and GBP/USD will be influenced by the price dynamics of the US dollar. Later in the early U.S. session, traders will look for clues from U.S. economic data, including the Chicago Purchasing Managers Index and the Conference Board Consumer Sentiment Index. In addition, U.S. bond yields will also drive demand for U.S. dollars and bring short-term trading opportunities for GBP/USD.
