GBP/USD faces resistance around 1.2800 as USD Index finds support, UK CPI eyed

• GBP/USD has faced barricades around 1.2800 amid an indecisive market mood.
• The US Dollar Index (DXY) has found intermediate support around 102.40 ahead of Fed Powell’s testimony.
• More interest rate hikes are expected from the BoE as UK’s Employment conditions are extremely tight.

The GBP/USD pair has sensed selling pressure near the round-level resistance of 1.2800 in the London session. The Cable is facing the heat as the market mood has turned indecisive due to the extended weekend in the United States.

S&P500 futures have generated significant losses as fears of a recession in the US economy have not faded despite the Federal Reserve (Fed) skipped the policy-tightening spell. The street is worried as the Fed has cleared that no rate cuts are appropriate this year s labor market conditions have not eased as expected.

Meanwhile, economists at HSBC cited that investors should prepare for some consolidation in US equities as valuations have risen, and the potential of further Fed tightening may cut into future earnings estimates and valuations in the short term. However, we feel the Fed is closer to the end of its monetary policy tightening cycle, and this should bode well for US equities.

The US Dollar Index (DXY) has found intermediate support around 102.40 after a sell-off move. Going forward, the testimony from Fed chair Jerome Powell will be keenly watched.

On the Pound Sterling front, investors are awaiting the release of the United Kingdom inflation data. Scrutiny of the UK inflation expectations shows that inflationary pressures would soften further but will be insufficient to force the Bank of England (BoE) to pause the rate-hiking spree. More interest rate hikes are expected from the BoE as UK’s Employment conditions are extremely tight and food inflation is not showing signs of peaking yet.