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GBP/USD, USD/JPY analysis today.


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GBP/USD will continue to be buffeted by interest rate expectations ahead of next week’s announcement on rates by the Bank of England’s monetary policy committee. Currently, the markets suggest a 62% chance that the MPC will hike rates by 25 basis points and that means there’s scope for GBP to ease back if rates are left unchanged.

The BoE’s new chief economist Huw Pill said last week that the MPC is “finely balanced” over whether to raise rates in November but his comments were seen as hawkish as he also said inflation in the UK could rise above 5% by early next year. That has added to the underlying strength of the Pound and also to the scope for the bulls to be disappointed.

Moreover, The GBP/USD has been sold off for 3 session in a row, with its correction attempts stopped at the 1.3736 support and settling around 1.3770 as of this writing. The pound still has a chance to rise with expectations of the Bank of England tightening its policy and a breakthrough in the energy crisis in the country, which caused strong losses for the pound against the rest of the other major currencies. Today there are no major reports due from the British economy, although it is worth noting that the Bank of England is under pressure to raise interest rates in order to keep inflation in check. The risk of stagflation is strong in the UK , where growth remains subdued while price pressures rise.

On the other hand, The USD/JPY pair maintained its bid tone heading into the North American session, albeit struggled to find acceptance or build on the momentum beyond the 114.00 mark.

The pair built on the overnight rebound from the 113.40 area, marking ascending trend-line support extending from September swing lows, and gained some follow-through traction on Tuesday. This marked the second successive day of a positive move and was sponsored by the prevalent risk-on mood, which tends to undermine the safe-haven Japanese yen.

The uptick, however, lacked bullish conviction amid the emergence of fresh selling around the US dollar, weighed down by an extension of the recent decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond has now dropped closer to the 1.60% threshold, though hawkish Fed expectations should act as a tailwind.

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