GBP/USD inter-market: Sell the rallies ahead of BOE?

GBP/USD finally broke the overnight consolidation phase to the downside during the European session this Tuesday, and came under aggressive selling pressure following the release of a tad weaker UK CPI figures, which markets used as an excuse to sell the bounce witnessed a day before.

On Monday, the cable stage a solid reversal during the NA session, and rallied as high as 1.3346 levels on the back of a sharp sell-off in the greenback triggered by more dovish-than expected comments from Fed Governor Lael Brainard.

The latest leg lower in the GBP/USD pair is mainly driven by the UK economic release, while the yield differential between the 10-year treasury yields and its UK counterpart continue to tilt in favor of the US dollar, which is also seen as the key catalyst behind the down move.

Further, extended sell-off seen in oil prices in response to bleak global demand scenario reflected by the IEA in its latest report, weighed on investors’ sentiment and hence, almost killed the appetite for higher-yielding/ risk currencies such as the GBP.

Looking ahead, the pound is expected to remain under pressure, as markets remain on the defensive ahead of the BOE decision due on Thursday, which may throw fresh light on the voting composition favoring further rate cuts and the Bank’s considerations on the UK economy. The immediate focus now remains on the UK jobs data lined up for release tomorrow.