GBP/USD faces barricades above 1.2200 as DXY advances, Fed Powell and BOE Bailey eyed

• GBP/USD is expected to establish below 1.2200 amid a firmer DXY ahead of Fed Powell.
• BOE’s Bailey may sound hawkish as the UK economy is operating at an inflation rate of 9.1%.
• Brexit has worsened as the UK administration has announced a gas supply cut-off to Europe.

The GBP/USD pair is attracting some offers after failing to sustain above the round-level resistance of 1.2200 in the early European session. Earlier, the asset rebounded after slipping below the critical support of 1.2180.  A responsive buying pushed the asset higher but now the focus has been shifted to the price action of the US dollar index (DXY).

The DXY is aiming to display an upside break of its consolidation phase formed in a range of 104.36-104.52 in the Asian session. At the press time, the DXY is attempting to sustain above 104.50 initially and then will violate Tuesday’s high at 104.61.

Investors are initiating longs in the DXY as expectations of a hawkish commentary on the interest rates by Federal Reserve (Fed) chair Jerome Powell in his speech on Wednesday have advanced. Soaring price rise amid costly fossil fuels and food prices makes the hawkish stance a deserving candidate for featuring in Fed Powell’s speech.

Adding to Fed Powell’s speech, a stable consensus for the US Personal Consumption Expenditure (PCE) is underpinning the greenback against the sterling. The cable is expected to remain in the grip of bears as a stable PCE dictates that the prior rate hikes have failed to make an impact on the inflation rate.

On the pound front, the speech from Bank of England (BOE) Governor Andrew Bailey will remain in focus. BOE’s Bailey may also discuss on bringing price stability to the UK economy. Considering the Western leaders, the UK is seldom operating above 9% inflation rate. Therefore, a hawkish commentary looks likely. Meanwhile, the UK administration has announced that the economy is ready to cut off gas supplies to mainland Europe in case its economy get hit by severe shortages under an emergency plan, the Financial Times (FT) reported on Tuesday. This may create the situation of lower oil stockpiles in the eurozone and will worsen the Brexit situation.