GBP/USD looks to settle around 1.3200 amid risk-on impulse, BOE policy eyed

• GBP/USD is eyeing 1.3200 as DXY weakens post the Fed’s policy announcement.
• The BOE is expected to raise its interest rates for the third time consecutively.
• This risk-on impulse has improved the demand for risk-sensitive currencies.

The GBP/USD pair has witnessed a sharp upside move after forming a base in a narrow range of 1.3000-1.3082. The cable was vulnerable in the past few trading sessions, however, the major has rebounded sharply on the announcement of the interest rate policy by the Federal Reserve (Fed).

The subdued performance of the greenback post the interest rate hike by the Fed has underpinned the pound. The Fed has raised its borrowing rates by 25 basis points (bps) to contain the galloping inflation. Apart from that, the Fed has announced seven interest rate hikes for 2022 to clean to inflation mess.

Bank of England (BOE) monetary policy on Thursday

Well, the hangover of the Fed’s monetary policy is getting over and investors are shifting their focus on the announcement of an interest rate decision by the BOE. It is worth noting that the BOE has elevated its interest rates consecutively to 50 basis points in the last two monetary policy announcements. The BOE was the first central bank that raised its interest rates after the Covid-19 pandemic. The BOE is expected to accelerate its borrowing rates further by 25 basis points to control the soaring inflation. The UK’s inflation is near a 30-year high of 5.5%, recorded in January, and is likely to rise further in wake of the war between Russia and Ukraine.

Meanwhile, the US dollar index (DXY) is eyeing more downside as the index is hovering around Wednesday’s low at 98.30 amid squeezing appeal for the safe-haven assets.