GBP/USD pars some intraday losses, just below 1.3200 ahead of BoE

• GBP/USD attracts some buyers amid expectations that the BoE will hold rates steady.
• Rising US bond yields are helping the USD gain some traction and limit gains.
• The bulls also seem reluctant to place aggressive bets and prefer to wait for the BoE’s decision.

The GBP/USD pair is finding some support near the 1.3150 region on Thursday and for now appears to have blocked its pullback slide from the vicinity of 1.3300, or the March 2022 high reached the previous day. Spot prices are climbing closer to the 1.3200 mark during the Asian session, although they lack follow-through amid some US dollar (USD) buying and are currently trading with modest losses on the day.

The United States Federal Reserve (Fed) on Wednesday decided to start the policy easing cycle and cut borrowing costs by 50 basis points (bps), although it cooled hopes for excessive interest rate cuts in the future. In addition, Fed policymakers do not see inflation returning to the 2% target before 2026, triggering a sharp recovery in US Treasury yields. This in turn lifts the USD Index (DXY), which tracks the greenback against a basket of currencies, to a one-week high and is proving to be a key factor putting downward pressure on the GBP/USD pair .

Meanwhile, expectations that the Bank of England (BoE) rate cut cycle is more likely to be slower than in the United States (US) continue to support the British pound (GBP) and help limit losses for the currency pair. The UK consumer price index (CPI) report released on Wednesday showed that inflation in the services sector accelerated more than expected in August. This reaffirmed bets that the BoE will keep rates steady at the end of the September policy meeting later on Thursday and should be cautious before placing bearish bets around the GBP/USD pair.

Traders may also prefer to go on the sidelines heading into the key risk of the central bank event. However, the fundamental context mentioned above suggests that the path of least resistance for the GBP/USD pair is to the upside. That said, the two-way price action seen over the past few days, along with the overnight failure near the 1.3300 level, warrants some caution for bullish traders. Therefore, some further buying is needed to support the prospects of extending the pair’s upward move from the psychological 1.3000 threshold or the monthly low reached last week.