GBP/USD flirts with two-week tops, eyes 1.3900 mark ahead of FOMC
- GBP/USD was seen consolidating its recent strong gains to near two-week tops.
- A declining trend in Delta variant infections in the UK underpinned the sterling.
- A modest USD strength capped any further gains ahead of the FOMC decision.
The GBP/USD pair traded with a mild positive bias through the first half of the European session, with bulls still awaiting a sustained move beyond the 1.3900 mark.
A combination of diverging forces failed to provide any meaningful impetus to the GBP/USD pair and capped the upside just ahead of the 1.3900 round-figure mark. The US dollar found some support on Wednesday amid a modest pickup in the US Treasury bond yields and the prevalent risk-off environment. This was seen as a key factor that acted as a headwind for the major.
The GBP/USD pair, for now, seems to have stalled its upward trajectory, though the bias seems tilted in favour of bulls in the absence of any Brexit-related headlines. The British pound was supported by the declining trend in Delta variant infections and comments by the UK’s top epidemiologist, Neil Ferguson, saying that the end of the pandemic could be just months away.
On the other hand, expectations that the Fed will stick to its dovish stance might hold the USD bulls from placing any aggressive bets and help limit any downside for the GBP/USD pair. Hence, the spotlight will remain on the outcome of a two-day FOMC monetary policy meeting. The Fed is scheduled to announce its decision later during the US session this Wednesday.
Market participants will look for a clear answer to the crucial question of when the tapering will begin. This will play a key role in influencing the near-term USD price dynamics. Traders might further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some short-term opportunities around the GBP/USD pair.
Technical levels to watch