GBP/USD manages to regain traction and cut earlier losses, trading around 1.3620 in the American session. Cable approaches its 2025 after a near-term US Dollar correction. Encouraging Middle East headlines and Powell's words back the upbeat mood
Risk flows continued to dominate the action in financial markets in the first half of the day on Tuesday as investors cheered news of the Iran-Israel ceasefire. As a result, the US Dollar (USD) struggled to find demand and allowed GBP/USD to push higher.
In the American session, Federal Reserve Chairman Jerome Powell's cautious comments on policy-easing helped the USD find a foothold. Powell told the House Financial Services Committee that they are not in a rush to cut rates, noting that they expect a meaningful increase in inflation this year because of tariffs.
Meanwhile, Bank of England (BoE) Governor Andrew Bailey told the Lords Economic Affairs Committee on Tuesday that they are starting to observe labor market softening. Additionally, BoE Deputy Governor Dave Ramsden said that if evidence becomes stronger that inflation will undershoot the target, they can speed up rate cuts. Although these comments failed to trigger an immediate market reaction, they might be contributing to GBP/USD's indecisive action midweek.
The economic calendar will not feature any high-impact macroeconomic data releases later in the day. Hence, investors could react to changes in risk perception. In case Wall Street's main indexes correct lower following Tuesday's risk rally, the USD could gather strength and make it difficult for GBP/USD to hold its ground.
Source: Fxstret
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