GBP/USD sees more downside below 1.2050 amid risk-off mood, UK GDP in focus

• GBP/USD is expected to witness more downside below 1.2050 amid the souring market mood.
• Fed policymakers have cleared that the battle against stubborn inflation will continue for a more extended period.
• The UK GDP is expected to display a flat performance on a quarterly basis on Friday.

The GBP/USD pair has gradually dropped to near 1.2065 and is expected to continue its downside journey after surrendering the immediate support of 1.2050. The Cable is struggling to maintain its feet as the risk appetite of the market participants has trimmed significantly. The odds of the continuation of the policy tightening streak by the Federal Reserve (Fed) is fading the appeal for risk-perceived assets.

S&P500 sensed a steep selling interest on Wednesday as Fed policymakers have cleared that the battle against stubborn inflation will continue for a longer period. Accordingly, the Fed would consider keeping higher interest rates for a more extended period to achieve price stability.  

The US Dollar Index (DXY) is aiming to sustain itself above 103.00 as the street is expecting that strong demand for labor will be followed by higher employment bills. Job seekers might be having more negotiation power, which could result in a higher labor cost index ahead. Meanwhile, the yields on 10-year US Treasury bonds dropped to near 3.61%.

New York Fed President John Williams clarified that the Fed has yet not reached a restrictive policy, which could be sufficient enough to tame solid inflation. Also, the central bank will be required to maintain a hawkish policy for a few years to make sure that the 2% inflation target will achieve confidently, as reported by Wall Street Journal.

Meanwhile, the Pound Sterling is likely to display a power-pack action after releasing the United Kingdom Gross Domestic Product (GDP) (Q4) data, scheduled for Friday. As per the consensus, the preliminary annual GDP data is expected to expand by 0.4% lower than the former release of 1.9%. And, the quarterly data is expected to remain flat against a contraction of 0.3%.

Apart from the GDP figures, Industrial Production and Manufacturing Production will be of utmost importance.