• GBP/USD skids to near yearly lows at 1.2513 as DXY strengthens on risk-off impulse.
• The uncertainty ahead of the Fed’s rate decision has improved safe-haven appeal.
• An interest rate hike by 25 bps is expected from the BOE.

A rangebound move was displayed by the GBP/USD pair in the early Tokyo session in a narrow range of 1.2528-1.2545, which has been broken down and may mark a fresh leg of weakness in the major. The asset has remained in negative territory for the past few trading sessions amid broader strength in the greenback.

The cable is expected to continue its five-day losing streak on Thursday as the risk appetite of the market participants is diminishing strongly amid uncertainty over the interest rate decision by the Federal Reserve (Fed) next week. Investors should brace for higher uncertainty ahead of the monetary policy announcement by the Fed as a jumbo rate hike (as expected) from the fed will bring a transition phase of a tight liquidity environment from loose monetary policy culture. The Fed is likely to elevate its interest rates by 50 basis points (bps).

Also, the Bank of England (BOE) will announce its monetary policy next week but investors are hoping for a standard rate hike of 25 (bps). The BOE raised its interest rates by 50 bps last time but a little less dovish tone is expected this time.

Meanwhile, the US dollar index (DXY) has renewed its five-year high at 103.47 as investors see US Core Personal Consumption Expenditure (PCE) at elevated levels. The US Core PCE is seen at 5.4% against the prior print of 5%. Apart from that, the US GDP will also remain focused. The quarterly and yearly GDP are seen at 7.3% and 1.1% respectively.