In broadly risk-off markets, the GBP/USD remains near to weekly lows.
Investors are bracing for a Fed move that is earlier than expected.
On Thursday, the foreign exchange markets have taken on a risk-off tone.
The mood is weighing on currencies like Sterling, which has dropped to its lowest level versus the euro in over three weeks and is just a few pips away from the 1.3731 lows set in early July.
GBP/USD is trading at 1.3777 at the time of writing, down 0.15 percent on the day after sliding from a high of 1.3805 to a low of 1.3741.
Following the release of minutes from the most recent Federal Reserve meeting, which reaffirmed that policymakers were moving toward tapering this year, there has been a broader shakeout in FX markets, which has supported safe havens.
According to the minutes, some Fed members viewed the prerequisites for tapering being met sooner than expected at earlier meetings.
“The main issue is that some people want to taper sooner rather than later, while others advise wait. With this division in place, it appears that tapering is unlikely to happen anytime soon,” Brown Brothers Harriman analysts explained.
“While we expect the debate to continue and heat up during the July 27-28 meeting, we don’t believe the Fed will commit to tapering at this time.” “However, we continue to believe the Fed will begin to taper before the end of the year, and we expect further clarity at the August Jackson Hole Symposium or the September 21-22 FOMC meeting.”
Meanwhile, the pound’s immediate direction will be determined by tomorrow’s series of UK macro releases, which include Industrial Production and May’s monthly Gross Domestic Product.
So far this week, sterling has found some support in British Prime Minister Boris Johnson’s intentions to lift COVID-19 limits on social and economic freedom in England.
However, as safeguards are relaxed, the number of coronavirus infections may rise, causing investors to be concerned.
The dollar’s recent broad-based strength could reassert itself, which will be observed given the US economy’s outperformance./n
