GBP/USD BULLS DOMINATE ABOVE 1.2400 AS UK STIMULUS LOOM, US DOLLAR DROPS AHEAD OF PMI, GDP DATA (2)

That said, the US Dollar Index (DXY) drops 0.30% intraday to 101.65 by the press time amid cautious optimism and the absence of the two-week ‘blackout period’ before the Fed meeting.

Federal Reserve Governor Christopher Waller was the last from the US central bank speakers to cross the wires as he said, “He favors a 25 basis point rate hike at the upcoming meeting and continued policy tightening beyond that.” However, the Wall Street Journal (WSJ) states that Federal Reserve officials are preparing to slow interest-rate increases for the second straight meeting and debate how much higher to raise them after gaining more confidence inflation will ease further this year.

Against this backdrop, the US Treasury bond yields remain depressed around the multi-day low while the stock futures print mild losses after the Wall Street benchmarks closed the week on a negative note.

Looking forward, the British economic calendar offers the first readings of January’s activity numbers and will be watched closely to gauge the need for more stimulus from Sunak. Also important will be the advanced readings of the US four-quarter (Q4) Gross Domestic Product (GDP).

Technical analysis

As the RSI (14) is near the overbought territory, it does highlight a 1.5-month-old resistance line near 1.2435 as the key challenge for the GBP/USD bulls.