GBP/USD hits three day highs ahead of FOMC minutes

• Cable rises to the 1.3580 area as the pound strengthens.
• Dollar weaker despite steady yields and lower equity prices.
• Critical event ahead: FOMC minutes at 19:00 GMT.

The GBP/USD gained momentum and climbed to 1.3583, reaching the highest level since Friday. It is hovering above 1.3565, with a positive tone ahead of the release of the FOMC minutes.

The pound also strengthened versus the euro during the American session. EUR/GBP tested earlier on Wednesday levels above 0.8400 and recently printed fresh daily highs under 0.8370.

Earlier on Wednesday, data showed inflation hit the highest level in more than thirty years in the United Kingdom in January. The consumer price index (CPI) increased from 5.4% to 5.5%, slightly above expectations. The pound held relatively steady after the report.

In the US, retail sales jumped 3.8% in January, the best month since April 2021. The dollar initially appreciated but then pulled back. A different report showed Industrial production in January rose 1.4%, above the 0.4% of market consensus.

The key event on Wednesday will be the release of the FOMC minutes of the last meeting at 19:00 GMT.  “A March hike is pretty much a done deal but markets will be looking for clues at the likely pace of tightening as well as when balance sheet runoff might be seen and what might trigger outright asset sales vs. simple runoff from maturing securities”, explained analysts at Brown Brother Harriman.

Testing levels above 1.3570

The GBP/USD is trading around 1.3575. The momentum will favor the pound while above 1.3570, with a test of 1.3600 on the cards. The next resistance stands at 1.3620. On the flip side, a slide back under 1.3545 should point to further weakness in cable exposing the next support at 1.3525.

Technical levels