GBP/USD Drops Back Closer to 1.1900 Mark

The GBP/USD pair turns lower for the second straight day amid the emergence of some USD dip-buying. This was after it faced rejection near the 1.2000 psychological mark.

The downward trajectory extended through the early part of the European session and dragged spot prices to a three-day low, around the 1.1920 region in the last hour.

The recent recovery in the equity markets ran out of steam rather quickly amid the worsening economic outlook. Investors remain concerned that rapidly rising borrowing costs, the Russia-Ukraine war and the latest COVID-19 outbreak in China would pose challenges to global growth. Apart from this, the nervousness ahead of the crucial European Central Bank decision led to an intraday turnaround in the risk sentiment. This, in turn, assisted the safe-haven US dollar to attract some dip-buying and exerted downward pressure on the GBP/USD pair.

The USD was further underpinned by elevated US Treasury bond yields, bolstered by expectations that the Fed would be forced to tighten its policy at a faster pace to curb soaring inflation. That said, receding bets for a 100 bps Fed rate hike move in July capped any meaningful upside for the greenback.

On the other hand, the British pound drew support from the fact that the Bank of England Governor Andrew Bailey on Wednesday raised the possibility of a 50 bps rate hike in August. This, in turn, helped limit deeper losses for the GBP/USD pair.

Source- FxStreet