Ella 
GBP/USD faced selling pressure for two consecutive days on Thursday and fell to the 1.2300 round mark in Asia, which is near a new low since early June.
The U.S. dollar (USD) managed to maintain gains from more than a week’s lows the day before the Fed meeting and remains near six-month highs, thus weighing on GBP/USD. As widely expected, the Federal Reserve (Fed) decided to keep interest rates on hold but maintained its forecast for rates to reach 5.5% to 5.75% this year and left the door open for another 25 basis point hike in 2023. Additionally, policymakers now see the benchmark interest rate at 5.1% next year, suggesting just two rate cuts in 2024, compared with four previously expected.
This argument of “maintaining high interest rates for a long time” has caused U.S. bond yields to continue to rise, coupled with the softening of the risk tone, continuing to support the safe-haven currency, the U.S. dollar. Indeed, two-year Treasury yields surged to 17-year highs and the benchmark 10-year Treasury yield hit its highest since late 2007. That in turn has heightened concerns about economic headwinds from rapidly rising borrowing costs and eroded investor appetite for riskier assets. In addition to this, expectations that the Bank of England (BOE) is about to pause its interest rate hike cycle continue to weigh on the pound and weigh on GBP/USD.
Data released in the UK on Wednesday showed headline inflation fell to an annual rate of 6.7% in August from 6.8% in July, beating consensus expectations of 7%. Also, importantly, core inflation – which strips out volatile food, energy, alcohol and tobacco prices – was 6.2% in the 12 months to the end of August, down from 6.9% in the previous reading. In addition, market concerns about the British economic recession have once again heated up, and there are signs that the British labor market is cooling, which once again confirms market expectations. As a result, markets will continue to focus on the Bank of England’s high-profile policy decision due later this Thursday.
Later in the early U.S. session, traders will take cues from U.S. economic data – which typically include weekly jobless claims, the Philadelphia Fed manufacturing index and existing home sales data. These data, along with US bond yields and market risk sentiment more broadly, could influence USD moves and provide some momentum for GBP/USD. That said, the above fundamental backdrop appears to favor bearish traders and suggests that downside resistance for GBP/USD remains minimal. Therefore, any rebound attempt is likely to be met with a sell-off and is more likely to continue to encounter resistance.
