GBP/USD bounces off multi-decade low, finds some support near 1.1300 ahead of FOMC

• GBP/USD recovers a few pips from its lowest level since 1985 touched earlier this Wednesday.
• An intraday pullback in the US bond yields caps gains for the USD and offers support to the pair.
• The attempted bounce lacks bullish conviction ahead of the highly-anticipated FOMC decision.

The GBP/USD pair finds some support near the 1.1300 mark and recovers a few pips from its lowest level since 1985 touched earlier this Wednesday. The pair, however, keeps the red for the second successive day and is currently trading just below mid-1.1300s, down around 0.30% for the day.

A combination of factors assists the US dollar to gain strong follow-through traction, which, in turn, exerts downward pressure on the GBP/USD pair. Expectations that the Fed will deliver another supersized 75 bps at the end of a two-day policy meeting on Wednesday continue to act as a tailwind for the buck. Apart from this, the risk of a further escalation in the Russia-Ukraine conflict offers additional support to the safe-haven greenback.

In the latest development, Russian President Vladimir Putin announced a partial military mobilization. This comes amid growing recession fears and tempers investors' appetite for riskier assets, which is evident from the prevalent cautious mood around the equity markets. The British pound is further pressured by the bleak outlook for the UK economy. This, to a larger extent, overshadows the prospects for a 50 bps rate hike by the Bank of England.

The anti-risk flow, meanwhile, triggers a modest pullback in the US Treasury bond yields, which, in turn, is holding back the USD bulls from placing fresh bets. Adding to this, Britain unveils a package to help businesses, capping the cost of electricity and gas. The combination of factors helps ease the bearish pressure around the GBP/USD pair, though any meaningful recovery still seems elusive as the focus remains on the key central bank even risks.

The US central bank is scheduled to announce its policy decision later during the US session. Investors will further take cues from the updated economic projections, the so-called dot plot and Fed Chair Jerome Powell's comments at the post-meeting press conference. This will be followed by the BoE meeting on Thursday, which will play a key role in influencing sterling and help determine the next leg of a directional move for the GBP/USD pair.

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