Ella 
GBP/USD attracted some buying on the first day of the new week and reversed some of last Friday’s decline to the 1.2380-1.2375 area, the lowest levels since June. Spot prices are currently trading around the 12,400 round figure and are finding some support from a weaker US dollar (USD), but any meaningful appreciation move remains elusive.
The outlook for U.S. stocks is generally positive, but this has failed to help the safe-haven Greenwich currency achieve its longest weekly winning streak since 2014. The dollar’s pullback may further be attributed to some repositioning trade ahead of key central bank event risks this week – the high-profile two-day FOMC monetary policy meeting starting on Tuesday. The Fed is due to announce its decision on Wednesday and is widely expected to keep interest rates on hold.
However, the market still sees the possibility of another 25 basis points rate hike in November or December. As a result, market focus will be on the accompanying policy statement and Fed Chairman Jerome Powell’s remarks at the post-meeting press conference. Investors will be looking for new clues on the path of future rate hikes by the Federal Reserve, which in turn will have a key impact on near-term US dollar price dynamics and help investors determine the next move for the GBP/USD currency pair.
Meanwhile, the likelihood of more aggressive tightening by the Bank of England (BOE) is diminishing, which could hinder traders from making aggressive bullish bets around the pound (GBP). In fact, Bank of England Governor Andrew Bailey told lawmakers that the Bank is now “closer” to ending its streak of rate hikes. This, along with renewed recession fears and signs of a cooling UK labor market, could put pressure on the Bank of England to pause its interest rate hike cycle.
With no market-moving economic data released on Monday, we need to remain cautious about any further economic recovery against the backdrop of the above fundamentals. Therefore, it would be prudent to wait for strong follow-through buying before confirming that a near-term bottom has been formed in the GBP/USD pair.
