GBP/USD gyrates in a bounded range above 1.2000 as Fed Powell’s testimony hogs limelight

• GBP/USD is demonstrating a sideways performance ahead of Fed Powell’s testimony.
• The street is having mixed responses to Fed Powell’s testimony for interest rate guidance.
• UK’s Industrial and Manufacturing Production data might contract due to higher rates by the Bank of England (BoE).

The GBP/USD pair is displaying a lackluster performance in an extremely narrow range around 1.2020 in the Asian session. The Cable has been gyrating in a range of 1.2000-1.2050 from Monday as investors look more interested in going gung-ho for building positions after Federal Reserve (Fed) chair Jerome Powell’s testimony.

S&P500 futures have added some gains after a directionless Monday, portraying a minor optimism among the market participants. The US Dollar Index (DXY) is displaying a subdued performance as investors are awaiting Fed Powell’s testimony for further impetus. The return provided on 10-year US Treasury bonds has dropped marginally to 3.97%.

The street has a mixed response to Fed Powell’s testimony. One school of thought is of the view that Fed Powell won’t endorse more rates as January’s upbeat consumer spending might not continue ahead. Higher interest rates by the Fed have critically made the United States economy vulnerable. However, the other school of thought believes that the Fed will deliver a hawkish stance as the battle against persistent inflation is well complicated yet.

Apart from that, labor market data will be the key event this week. Wednesday’s US Automatic Data Processing (ADP) Employment data is seen at 195K, higher than the prior release of 105K. Strong demand for labor could propel the fears of more rates from the Fed. And, could spurt fears of a recession in the US economy.

On the Pound Sterling front, Friday’s data will be keenly focused. United Kingdom’s monthly Industrial Production (Jan) is expected to contract by 0.2% against an expansion of 0.3% reported in December. Monthly Manufacturing Production is expected to contract by 0.2% ahead.