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Title: GBP/USD rebound pokes 1.0800 as BOE hesitates, DXY tracks yields ahead of key data

September 27, 2022 12:11 AM ET

By: AnalysisWatch

GBP/USD reverses the previous day's heavy losses and bounces off its all-time low at 1.0780 early Tuesday morning in Europe. Thus, the currency pair again reaches its daily high and simultaneously breaks its five-day downtrend.

The U.S. Dollar Index (DXY), on the other hand, falls back from its 20-year high and is down 0.40% at 113.68 at press time as poor U.S. data and inflation expectations are joined by lower yields.

Nonetheless, U.S. Treasury yields are falling from multi-year highs, while S& P 500 futures are posting modest gains at press time. Still, U.S. 10-year Treasury yields rose to their highest level in 12 years, while 2-year bond coupons topped 15-year highs as traders sought safety. In addition, the Chicago Fed National Activity Index weakened to 0.0 in August from market expectations of 0.09 and an upwardly revised prior reading of 0.29. The 10- and 5-year breakeven inflation rates, according to data from the St. Louis Federal Reserve (FRED), showed fresh multi-day lows on Monday, with longer-term inflation expectations falling to their lowest since July 13, 2022, while the 5-year benchmark fell to the lowest since June 2021, at 2.32% and 2.33%, respectively.

GBP/USD is likely to continue the recent correction, but upside potential is limited ahead of the release of US CB Consumer Confidence for September and Durable Goods Orders for August. Headlines from the UK are also important.

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