• Less than expected Hawkishness from Fed Powell weakens the US dollar and in turn favor the Cable.
• Investors remain optimistic with expectation of rate hike from BoE.
• Fears about UK Brexit Minister Truss having personal reasons to trigger Article 16 creates woes before Thursday meeting.

Pound is trading higher against the US dollar during Wednesday Asian session. The recent strength of the pound takes clues from the Fed Chair Jerome Powell’s testimony in front of the US Senate Banking Committee.

In testimony at his renomination hearing on Tuesday, Powell said the U.S. economy was ready for higher interest rates and a runoff of its asset holdings – dubbed quantitative tightening (QT)  to combat inflation. However, he said policymakers were still debating approaches to reducing the Fed’s balance sheet, which could sometimes take two, three or four meetings for them to make such decisions.

Atlanta Fed President Raphael Bostic said on Monday “High inflation and a strong recovery will require the Federal Reserve to raise interest rates at least three times this year, beginning as soon as March, and warrant a rapid rundown of Fed asset holdings to draw excess cash out of the financial system.”

Analysts said “Powell’s overall message on Tuesday was less hawkish than some investors had expected, especially in light of recent commentary from some other Fed speakers”.

Powell’s comments weakened the US dollar and in turn favored the pound.

Elsewhere, Over the past weeks, investors are hopeful with expectations that the BoE will raise interest rates as early as next month after a surprise hike in December by 15 basis points, to 0.25%.

On the other hand, As per a recent news, British Commentator Henry Hill mentioned that British Trade Minister, who is also the newly appointed Brexit Chief, has the “personal motivation” to force Boris Johnson’s hand on Article 16 “whether he wants it or not.” The reason for this is that Truss is a contender for the Conservative leadership.

Other catalysts working against the pound are the recent high Uk covid cases and the growing fear of wide spread ahead.

GBP/USD 4 Hour Chart:

Support: 1.3584 (S1), 1.3535 (S2), 1.3509 (S3).

Resistance: 1.3659 (R1), 1.3685 (R2), 1.3734 (R3).

Cable pair trades higher amid the US dollar weakness and traders now wait for the US CPI data; we expect a bullish trend for GBP/USD.