GBP/USD steadies above 1.2300 as markets expect BoE, Fed approaching policy pivot

• GBP/USD struggles for clear directions after two-day downtrend.
• UK’s record deficit, fresh Brexit woes and fears of strong recession due to workers’ strikes favor bears.
• Receding hawkish concerns surrounding Fed, downbeat US data put a floor under the Cable price.
• Second-tier UK data may entertain traders ahead of US Q4 GDP.

GBP/USD holds lower ground near 1.2320 as bears seek more clues to rule further heading into Wednesday’s London open. In doing so, the Cable pair remains sidelined after a two-day downtrend while copying the broad market inaction.

In addition to a lack of liquidity in the markets, receding hawkish hopes from both the Bank of England (BoE) and the Federal Reserve (Fed) also seems to limit the quote’s latest moves.

As per the latest Reuters Poll, the BoE has a gap for only two rate hikes worth 0.25% before hitting the pivot level. On the other hand, “Fed fund futures see only two more quarter-point rate hikes by the Fed to a peak of around 5% by June, before it starts cutting rates later in the year. The Federal Reserve itself has insisted it still has 75 bps of increases in the pipeline,” said Reuters.

Additionally, downbeat prints of both the UK and the US activity data for January failed to provide any clear directions for the Cable pair traders.

It’s worth noting, however, that the various stimulus and energy payments have led to the UK’s record deficit but couldn’t solve the workers’ problem in Britain, both of which signal more negatives for the GBP/USD pair. Additionally, the talks of the sustained disagreement between the UK and Europe over Brexit also lure the pair sellers.

On the other hand, US recession woes are on the table and hence the US Dollar trades dicey ahead of the US Gross Domestic Product (GDP) for the fourth quarter (Q4) and the next week’s Federal Open Market Committee (FOMC) meeting.

Amid these plays, US Treasury bond yields remain inactive after Tuesday’s pullback while the S&P 500 Futures print mild losses but the stocks in the Asia-Pacific region trade mixed and support the currencies of the zone.

Looking forward, the UK Producer Price Index (PPI) details for January may entertain GBP/USD traders ahead of Thursday’s key US Q4 GDP and the next week’s Fed meeting.

Technical analysis

A daily closing below the 13-day-old support line, now resistance around 1.2350, keeps GBP/USD bears hopeful.