GBP/USD skids to near 1.2100 as DXY turns volatile at open, Fed minutes buzz

• GBP/USD has corrected to near 1.2100 as DXY displayed a volatile show at open.
• The release of the Fed minutes will be the major event for the greenback bulls.
• Pound bulls are facing the headwinds of real income shocks and Brexit jitters.

The GBP/USD pair has slipped to near the critical support of 1.2100 after facing barricades around 1.2118 in the Asian session. The cable is in a correction mode after failing to sustain above 1.2160 on Monday, however, a resumption in the upside journey cannot be warranted as the market participants are awaiting the release of the Federal Open Market Committee (FOMC) minutes on Wednesday.

The US dollar index (DXY) is displaying wild moves at the open as an extra-long weekend on US Independence Day added volatility to the asset.

The release of the minutes after the policy announcement facilitates the market participants with more information on the condition of the US economy and how policy decisions will impact the economy further.

Investors must be aware of the fact that the Federal Reserve (Fed) announced a 75 basis point (bps) interest rate hike to combat the soaring inflation. The inflation rate has climbed to 8.6% despite the balance sheet reduction program and the elevation of the borrowing rates to 1.50-1.75%. The detailed minutes on the interest rate decision will delight investors and help them to take informed decisions.

Meanwhile, the pound bulls are broadly on the backfoot amid tensions on renewed Brexit and enlarging real income shocks in the UK economy. The odds of the UK returning to the EU have trimmed significantly as Sir Kier Stammer, leader of the labor party in the UK has denied returning to the EU. Speaking to the BBC's political editor Chris Mason before the speech, Sir Keir said: "We want to go forward, not backward. And therefore this is not about rejoining the EU.

Also, the households in the UK economy are facing the headwinds of large real income shocks. The inflation rate in the pound region has surpassed 9% and its multiplier effects have trimmed the paychecks of the households. The Bank of England (BOE) is highly required to focus on cooling off the ultra-hot inflation.