GBP/USD struggles around 1.2080, upside remain favored amid upbeat market sentiment

• GBP/USD is facing fragile barricades in overstepping the critical hurdle of 1.2080.
• FOMC minutes are supporting a slowdown in the rate hike pace to reduce financial risks.
• BOE’s Bailey is expected to hike its interest rates by 50 bps in December monetary policy meeting.

The GBP/USD pair is displaying signs of loss in the upside momentum while attempting to cross the immediate hurdle of 1.2080 in the Tokyo session. The upside momentum is not completely exhausted as the risk profile is full of optimism. A continuous oscillation of the Cable above the psychological resistance of 1.2000 indicates that bulls are in their comfort zone and more upside is still favored.

Meanwhile, the US dollar index (DXY) is set to test the round-level support of 106.00 due to a sheer decline in safe-haven’s appeal. The downside momentum in the US Dollar could drag it to a test of a three-month low at 105.34 as odds of continuation of 75 basis points (bps) rate hike structure by the Federal Reserve (Fed) are fading away.

The 10-year US Treasury yields have slipped below 3.69% as a majority of Fed policymakers are supporting a slowdown in the pace of hiking interest rates. The minutes of the Federal Open Market Committee (FOMC) cleared that Fed think tanks are likely to observe the progress of the efforts made yet to bring price stability. Also, a reduction in financial risks is highly required now.

On the United Kingdom front, after adding 75 bps in the interest rates by the Bank of England (BOE) in its November monetary policy. BOE Governor Andrew Bailey is expected to escalate interest rates further by 50 bps, according to a Reuters poll conducted on Nov 18-22.

BOE Chief Economist Huw Pill cited that surge in people quitting the British workforce because of ill health or early retirement could force the BOE to further increase interest rates, as reported by The Guardian. He further added that “Accelerating unemployment among the working age population is indicating an adverse supply shock, which could lead to higher payroll bills for the employers, and henceforth a rise in inflation”.