New Supply Encountered
The GBP/USD currency pair has seen some level of sales in the course of the earlier half of the European session, and it consequently fell to the area of 1.2700, taking it back to revisit the year-to-date low point it reached on Monday.
GBP/USD price chart. Source TradingView
After the pair gained an early increase to the area of 1.2770, it was made to encounter a new supply early on Tuesday before it had a downturn underneath for the fourth day in a row as there was a new surge in the purchase of the US dollar. The close possibility of a faster pace of raising interest rates in the US, as well as the cautious market mood, has boosted the US dollar to its highest point since it was last there in March 2020 and put more pressure downward on the price of spots.
The market has continuously pushed the bet of an aggressive monetary policy to be implemented by the Federal Reserve, and it is eagerly expecting a 50 basis points increase in the interest rate to be announced at every one of the four consecutive meetings of the Federal Open Market Committee slated May through July and September.
COVID Spreads in China
Aside from that, new COVID restrictions and lockdown across some Chinese cities have been fueling concerns over the sluggishness taking over the global economy. The slow pace of the global economy has taken a toll on the risk sentiment of investors, but it has greatly been of benefit to conservative safe-haven commodities such as the US dollar and the British pound.
In Britain, on the other hand, the pound sterling has been a casualty of the latest set of disappointing data from various domestic indicators, and it all shows that the economy of the United Kingdom is suffering tremendous stress from the escalated cost of living. This has caused investors to cut back on their bets on more interest rate increases in the future coming from the Bank of England, and it supports the possibility of more move of depreciation for the GBP/USD currency pair as there are no relevant economic publications coming from the United Kingdom this week.
Later in the North American session, traders are going to a cue from the economic dockets in the United States, which will feature the publication of the Durable Goods and Consumer Confidence Index Conference, Board. The general market risk sentiment will equally be of great influence to the US dollar and its dynamics.