GBPUSD has sensed an intermediate cushion around 1.1500 ahead of US mid-elections.
US recession fears have inched higher led by higher inflationary pressures and aggressive policy tightening.
Discussions between UK PM and EC President have brought a sense of optimism to the post-Brexit arrangement.
The GBPUSD pair has sensed a halt in the downside trend around the psychological support of 1.1500 in the Tokyo session. The Cable could rebound firmly ahead as recession fears in the US economy are accelerating dramatically. The positive risk profile is strengthening further as S&P500 futures are extending their gains in Asia after a bullish Monday.
Meanwhile, the US dollar index (DXY) is facing hurdles around 110.33 after a rebound move as investors have turned cautious citing recession fears.
Analysts at Goldman Sachs noted that the chances of the US economy entering into a recession in the next year stand at 35%. The reasoning behind escalating recession fears is the extreme deviation in desired inflation target and current inflation rate, aggressive Fed policy tightening, and exceptionally uncertain conditions in terms of domestic US politics and geopolitics.
The returns generated on US government bonds have climbed to 4.22% despite a decline in odds of the fifth consecutive 75 basis points (bps) rate hike by the Federal Reserve (Fed). As per the CME FedWatch tool, the chances of a 75 bps rate hike in December monetary policy have been trimmed to 43.2%.
Going forward, investors will keep an eye on the outcome of the US mid-term elections. A majority win for Republicans could trigger political instability in the US economy and may impact gold prices.
Talking over the UK front, the release of the Gross Domestic Product (GDP) data will hog the limelight. On an annual basis, the GDP data is seen lower at 2.1% vs. the prior release of 4.4%. And, the quarterly regime is expected to display negative growth by 0.5% against an expansion of 0.2%.
Meanwhile, a discussion held at the CP27 climate summit between UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen has brought optimism to the Brexit arrangement. The officials agreed to “work together” to end the ongoing row over the Northern Ireland protocol (NIP) in their first meeting, as reported by SkyNews.
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