GBP/USD Is Perched Just Above a Two-Week Low And Appears Vulnerable To Further Losses

During Thursday's Asian session, the GBP/USD pair oscillates within a narrow trading range and consolidates the overnight decline to the vicinity of 1.2600, a two-week low. The pair is currently trading within the range of 1.2630-1.2625, down less than 0.10% on the day, and appears susceptible to extending its recent corrective decline from the yearly peak reached this month.

In the wake of Federal Reserve Chair Jerome Powell's hawkish remarks on Wednesday, the US Dollar (USD) is near a two-week peak and is seen as a key factor weighing on the GBP/USD pair. Powell, speaking at a European Central Bank (ECB) conference, reaffirmed that two rate hikes are probable this year and did not rule out the possibility of a rate hike at the July 25-26 FOMC policy meeting. Powell added that he does not anticipate inflation reaching the Fed's 2% target until 2025.

The British Pound (GBP), on the other hand, is weighed down by concerns that the UK economy will enter a recession, especially following the Bank of England's (BoE) unexpected 50 bps rate hike last Thursday. Additionally, investors appear concerned that further increases in interest rates will trigger a mortgage crisis and increase the cost of borrowing government debt. The concerns were exacerbated by BoE Governor Andrew Bailey's remarks, which hinted that interest rates could remain at peak levels for longer than currently anticipated by traders.

The preceding fundamental environment appears to favour bearish speculators and suggests that the path of least resistance for the GBP/USD pair is down. Some additional selling below the overnight swing low will reaffirm the bearish bias and pave the way for an additional near-term depreciation. Market participants now await fresh impetus from the US economic calendar, which includes the final Q1 GDP print, Weekly Initial Jobless Claims, and Pending Home Sales.