GBP/USD weakened on Tuesday, retreating from overnight highs by 1.1460 to support just below 1.1400 as Ukraine tensions alongside looming Fed and BoE rate decisions kept cable vulnerable to testing recent 37-year lows.
News that two Russian-controlled regions in eastern Ukraine planned to hold referendums on joining Russia later this week nL8N30Q4U0 buoyed the safe-haven dollar, cutting short position reduction ahead of this week's rate announcements and sent sterling sliding toward 2022 lows.
The Fed is expected to deliver a 75bp hike on Wednesday, maintaining the dollar's rate advantage over sterling, while the U.S. central bank remains in a more advantageous position than the BoE with U.S. inflation 160bp lower than UK price growth.
Futures pricing currently puts U.S. rates approximately 60bp above UK rates by mid-December central bank meetings IRPR.
The Fed's more aggressive policy could bring U.S. inflation back to target earlier, allowing it to shift focus to shoring up growth before the BoE.
Barring a more hawkish BoE -- which meets on Thursday -- or early Fed pivot on rates, GBP/USD's recent 37-year of 1.1351 is likely to come quickly into focus.
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