GBP/USD reversed its direction after testing 1.2200 earlier in the day and dropped below 1.2150. The negative shift seen in risk, as reflected by the bearish action in Wall Street, provides a boost to the USD and weighs on the pair ahead of key central bank meetings.
The pair fluctuated in a narrow channel in the Asian session before retreating to the 1.2100 area in the European morning. The near-term technical outlook suggests that the bearish bias stays intact.
Over the weekend, the United Arab Emirates (UAE) requested a UN Security Council emergency meeting to discuss the situation in the Gaza Strip, asking “for an immediate ceasefire to ensure that civilians and civilian institutions are not targeted.”
There seems to be an improvement in risk mood following this development on Monday, with the UK’s FTSE 100 Index gaining more than 0.5% in the European session. Additionally, US stock index futures trade in positive territory, pointing to a bullish opening in Wall Street.
Nevertheless, the US dollar (USD) stays resilient against its rivals, making it difficult for GBP/USD to gain traction. In case the risk rally picks up steam in the second half of the day, the USD could lose some interest. The US economic docket will not feature any high-impact data releases on Monday.
Later in the week, the Federal Reserve (Fed) and the Bank of England (BoE) will announce monetary policy decisions. Investors could opt to stay on the sidelines ahead of these events and limit GBP/USD’s action.