• The GBP/USD remains negative in the week, down by 1.76%.
• An upbeat market sentiment ahead of the US central bank decision keeps equities in the green.
• Mixed US economic data, mainly ignored by investors, ahead of the Fed decision.

The British pound gained some ground on Wednesday and trimmed five days of consecutive losses after reaching a 2-year low at around 1.1935. However, the GBP/USD stages a recovery and is back above the 1.2000 mark, trading at 1.2092, up by 0.81% at the time of writing.

Positive sentiment and lower US Treasury yields, a tailwind for GBP/USD

The pullback in US Treasury yields weighed on the greenback against the pound. The US 10-year Treasury yield is sliding five bps, at 3.418%. Meanwhile, the US Dollar Index, a measure of the buck’s value against some peers, records minimal losses of 0.06%, down at 105.411.

Sentiment remains positive, with US equities trading in the green. In the meantime, the US economic docket featured May’s US Retail Sales, which missed monthly expectations and decreased by -0.3% MoM, lower than April’s downward revision to 0.7%. However, excluding autos and gas, it rose 0.1% MoM but trailed the previous month’s figure. At the same time, June’s NY Empire State Manufacturing Index rose to -1.2, worse than estimations but better than the -11.6 May reading.

Despite the ongoing correction, analysts at Scotiabank expected cable to fall below 1.2000. They wrote in a note that “In addition to the UK’s economic weakness, EU-UK tensions over No10’s push to unilaterally re-write the Northern Ireland Protocol and Sturgeon’s push for a Scottish independence vote next year are weighing on GBP sentiment.”

“We think the BoE will deliver a less hawkish message than markets are expecting tomorrow that combined with a large hike from the Fed today risks losses extending a few cents below 1.20 in coming weeks,” Scotiabank analysts said.

Key Technical Levels