The pound has come under heavy pressure recently, particularly against the dollar which has been performing well against the broader market.
While the BoE is poised to continue its run of a rate hikes at every meeting, making it one of the more hawkish central banks, the moves in the pound are also a reflection of the challenges facing the UK economy, which the central bank believes is heading for double-digit inflation and a recession.
The pair struggled to capitalize on its recent strong rebound from a two-year low touched last week and faced rejection near the 1.2500 psychological mark on Wednesday. The early downtick was sponsored by the emergence of someUS dollardip-buying, bolstered by expectations for a more aggressive policy tightening by the US central bank.
The volatile price actions have resulted in a mixed outlook, as market expectations were for the overbought rally in GBP to extend over the 1.2500 mark, but that was incorrect as it staged a surprisingly sharp sell-off to a low of 1.23300, which counted as strong support. Currently, the price is trading at 1.23400, and the difficultexternal environment would favor a break of 1.23300 support in a move back to the 1.22 lows and eventually to the 1.21550 yearly lows.
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