GBP/USD came under renewed pressure on Tuesday, falling 0.63% to 1.2508, after unexpectedly soft PMI data nL2N2XG0LM revived UK recession fears, potentially foreshadowing a test of sterling's recent lows unless Wednesday's Fed minutes raise doubts about U.S. rate hikes.
Though UK inflation is hot, cooling economic growth is weighing on rate futures across the Sonia strip as traders discount a less aggressive BoE and re-price GBP/USD lower amid Fed and ECB rate normalization expectations.
The data suggests sterling may have established a top by its falling 30-day moving average at 1.2599, with bears targeting former resistance at the 21-DMA at 1.2430.
GBP/USD bulls hopes' rest on recent comments by Fed officials that diminished speculation about more aggressive rate hikes than the 50bp increments signaled for the next two meetings, a shift which moved the dollar off recent trend highs.
If the Fed minutes echo Monday's dovish comments by non-voting Atlanta Fed President Raphael Bostic nL2N2XF1VO, GBP/USD could return to recent highs, with a close above 50% Fib resistance at 1.2652 putting the 55-DMA by 1.2832 in focus.
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