GBP vs USD is attempting to capitalize on a moderate rise in the Asian session to slightly above 1.2800, but has ultimately fallen lower for the third consecutive day on Wednesday. Currently, the spot price is hovering around 1.2770-1.2765, just a few points above the nearly four-week low reached on Tuesday.

The US dollar (USD) experienced an intraday reversal after Fitch downgraded the US government's credit rating from AAA to AA+, while continued support comes from speculation about further tightening by the Federal Reserve (Fed). On the other hand, the British pound (GBP) is weighed down by diminishing chances of more aggressive rate hikes by the Bank of England (BoE), further limiting gains in the GBP vs USD pair.

It is worth noting that Federal Reserve Chairman Jerome Powell stated last week that the economy still needs to slow down and the labor market needs to weaken for inflation to credibly return to the 2% target.

Additionally, newly released US macroeconomic data indicates that the economy is very strong, opening the door for another 25 bps rate hike by the Fed in September or November. This will continue to support rising US Treasury yields and strengthen the Greenback.

However, the generally weaker risk sentiment, as reflected in the decline of US stock futures, favors the Greenback as a relatively safe-haven asset. Meanwhile, the potential for a decline in the GBP vs USD pair remains limited, at least for now, as the market anticipates two more rate hikes by the Bank of England (BoE) by the end of this year due to ongoing inflationary pressures. Therefore, attention will remain focused on the important BoE monetary policy meeting on Thursday.

Facing the risk of key events from central banks, traders will be watching the US ADP report on private sector jobs, which will be released later in the early North American session on Wednesday.

This, along with the movement of US Treasury yields and overall risk sentiment, may impact USD exchange rates and influence the GBP/USD pair. Given the varied fundamental backdrop mentioned above, market participants will tread cautiously before making directional trades.

Disclaimer!

This analysis is based on fundamental and technical perspectives from reliable sources and is not intended as advice or solicitation. Always remember that this content aims to enrich the reader's information. Always conduct independent research regarding other forex information to serve as a reference for your trading.

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