GBP/USD rose 0.3% to 1.3993 on Wednesday, extending gains off its recent double bottom near its trend low 1.3787 and consolidating within its daily Bolli envelope spanning 1.3904 to 1.4298, with the BoE looming as the next big event risk.
Sterling bulls are emboldened after Tuesday's Fed walk-back of post-FOMC hawkishness, with Chair Jerome Powell reiterating his stance that recent rises in inflation are transitory and that the U.S. central bank was in no rush to tighten until a clearer view of the recovery is availablenN9N2M1018.
Powell's comments came ahead of Thursday's MPC meeting, but the Fed's recent shift may still encourage the BoE move to a less-dovish policy outlook.
Expectations for such a change have lifted GBP/USD toward multiple resistance levels just above 1.40, including 10- and 55-day moving averages at 1.4005 and 1.4007, and the daily cloud top capping sterling at 1.4012.
The softer Fed outlook after last Wednesday's hawkish dot-plot kerfuffle May open the way for further GBP/USD retracement toward the June 1 high at 1.4250.
However, the BoE may be reluctant to move to a full-on hawkish stance, fearing a unchecked rise in GBP/USD may act as a de-facto early hike, choking off growth and inflation while post-Brexit trade and COVID variant angst linger.
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