GBP/USD Rebounds Near 1.1850 with Dollar Index Exhaustion

The GBP/USD currency pair has staged a quick recovery after bullish traders of the British Pound defended the 1.1800 support line during the Tokyo session on Monday. The pair is not going in the direction of the critical obstacle at 1.1850 and it is possible it crosses it.

US Dollar Index Exhaustion

The pair’s crossover is possible because the US Dollar index is dealing with the heat of being exhausted after a huge rally. The asset now sits on the edge of displaying an upward breakout of the consolidation created within a chartered area of 1.1805 to 1.1834.

GBP/USD price chart. Source TradingView

For a period of time now, bulls of the British Pound beat the continuous three-day losing streak when it did not surrender the low point levels it reached on Friday at 1.1791. The Dollar index has shown a little drop after it failed to hold up beyond 108.20. The Dollar index, thus, picked up offers following the wide expectations of another 75 basis point interest rate increment by the Federal reserve got cut down.

Commentators said most of the economists that responded to the poll put out by Reuters on the 16th to 19th of August said there will be a half of a percentage point increase in September. The same result was from the previous poll that was going to get the major interest rates between 2.75% and 3.00%.

Staggering Inflation in the UK

It is expected that the statement from the Federal Reserve’s Chairman, Jerome Powell, will clarify assumptions of uncertain moves over more guidance. A slower pace of interest rate increase is on the table for the Federal Reserve. It is considering this in order to stave off the result of squeezed liquidity from the money market.

In the United Kingdom, however, poor employment reports had an impact on the British Pound’s bullish traders. But a relatively good upbeat cost of labor report gave the Bank of England a sigh of relief.

The United Kingdom’s inflation rate is escalating at an alarming rate. And the wage rates became vulnerable, having to settle higher payouts in the economy. Policymakers at the Bank of England were, therefore, not deploying any quantitative policy tightening dispensations with any independencies.

The significant improvement that surrounded the recent index of the cost of labor will be a delight to the Governor of the Bank of England, Andrew Bailey. This goes on while the bank drafts its monetary policy.