- GBP/USD finds support from dip-buyers amid expectations of the BoE holding rates steady.
- Climbing US bond yields boost the USD, limiting further gains for the pair.
- Bulls remain cautious, opting to hold off on aggressive bets ahead of the BoE decision.
The GBP/USD pair found support near the 1.3150 region on Thursday, halting its pullback from the 1.3300 level, the highest since March 2022, reached the previous day. During the Asian session, the pair edged closer to 1.3200 but lacked strong momentum as ongoing US Dollar (USD) buying capped gains, leaving spot prices with modest intraday losses.
The US Federal Reserve (Fed) initiated its policy-easing cycle by cutting borrowing costs by 50 basis points (bps) on Wednesday, though it tempered expectations for aggressive rate cuts in the future. Additionally, Fed officials do not anticipate inflation reaching the 2% target before 2026, sparking a sharp recovery in US Treasury bond yields. This contributed to the USD Index (DXY) climbing to a one-week high, applying downward pressure on GBP/USD.
However, expectations that the Bank of England's (BoE) rate-cutting cycle will likely be slower than that of the US continue to support the British Pound (GBP), helping limit losses for the pair. Wednesday's UK Consumer Price Index (CPI) report revealed higher-than-expected inflation in the services sector for August, reinforcing market bets that the BoE will keep rates unchanged at the end of its September meeting. This has prompted traders to exercise caution before placing bearish bets on GBP/USD.
With the key BoE decision looming, many traders are opting to stay on the sidelines. Nonetheless, the broader fundamental outlook favors a potential upside for GBP/USD. However, given the recent two-way price action and the pair's failure to break past the 1.3300 mark, bullish traders should approach with caution. A sustained push higher is necessary to confirm a continued move up from the 1.3000 psychological level, the monthly low reached last week.
