GBP/USD holds above 1.3600 mark post-UK PMI, awaits FOMC decision
- GBP/USD gained positive traction on Wednesday and snapped three days of the losing streak.
- BoE rate hike expectations extended some support to the pair amid a subdued USD demand.
- Brexit jitters kept a lid on any meaningful upside ahead of the critical central bank meetings.
The GBP/USD pair maintained its bid tone through the first half of the European session and was last seen trading near daily tops, around the 1.3625-30 region.
The pair managed to defend the 1.3600 round-figure mark and staged a modest recovery from three-week lows on Wednesday, snapping three successive days of the losing streak. Expectations for an imminent Bank of England interest rate hike move by the end of this year turned out to be a key factor that extended some support to the British pound. Apart from this, a subdued US dollar demand provided a modest lift to the GBP/USD, though the uptick lacked bullish conviction.
The impasse over the post-Brexit arrangements for Northern Ireland, along with worries that the UK Prime Minister Boris Johnson will trigger Article 16 held bulls from placing aggressive bets. This overshadowed a positive development, wherein France announced to delay the imposition of threatened sanctions on UK trade amid a row over post-Brexit fishing rights. The GBP/USD pair reacted little to an upward revision of the UK Services PMI to 59.1 for October from 58.0 estimated.
Investors seemed reluctant and preferred to wait on the sidelines ahead of the key central bank meetings. The Fed is scheduled to announce its monetary policy decision later during the US session and is expected to begin tapering its $120 billion-a-month asset purchase program. However, the key focus will be on the accompanying policy statement and Fed Chair Jerome Powell's remarks at the post-meeting press conference.
Investors will look for hints about the likely timing when the US central bank will raise interest rates, which, in turn, will influence the USD. Apart from this, the BoE policy meeting on Thursday should assist investors to determine the near-term trajectory for the GBP/USD pair. In the meantime, Wednesday's US macro data – the ADP report and ISM Services PMI – might provide some trading impetus to the GBP/USD pair.
Technical levels to watch