GBP/USD Corrects to 1.2420s Amid Resistance and Dollar Correction

GBP/USD corrects towards a 38.2% Fibonacci retracement level near the 1.2420s as it faces resistance while the Greenback gives up some gains following Tuesday's rebound. The price level of 1.2420s could pose as a potential resistance area before a possible downward continuation.

US Dollar Gains Amid Risk-Averse Market Sentiment

Market sentiment turned risk-averse amid concerns about the banking sector's earnings, which led to the US dollar's rise. The DXY index, which measures the US dollar against a basket of currencies, benefited from related risk-off flows and touched a high of 101.949.

First Republic Bank's Deposits Worry Banking Sector

Plunging deposits at First Republic Bank have reignited worries over the health of the banking sector. Additionally, UBS reported a 52% decline in quarterly income as it prepared to take over fallen rival Credit Suisse. The weak consumer confidence report and the decline in Federal Reserve manufacturing data also contributed to the stock rout on Wall Street, supporting the US dollar's safe-haven qualities.

BOE Deputy Governor Defends Bank's Policies on Inflation

Analysts at Brown Brothers Harriman reported that the Bank of England Deputy Governor defended the bank's policies, stating that the BOE's QE program during the pandemic was not responsible for the current high inflation shock. He noted that the excessive inflation is not well supported by evidence and that very large jumps in import prices, such as energy, seem the more likely cause.

BOE Anticipates Another 25 bp Hike in June

The analysts anticipate another 25 bp hike in June, priced at around 80%, while odds of one last 25 bp hike peak out near 75% for September 21. The peak policy rate is seen near 5.0%, and the analysts speculate that the rate will increase from 4.75% at the start of last week and between 4.50-4.75% at the start of the week before that.

GBP/USD and BOE Rate Hikes Affect Forex Market

GBPUSD is one of the most traded currency pairs in the forex market, representing the exchange rate between the pound sterling and the US dollar. The current correction towards the 1.2420s level and the resistance it faces could potentially affect the market sentiment and traders' positions in the forex market. Furthermore, the US dollar's rise due to risk-averse market sentiment and the anticipated BOE rate hikes could influence the GBP/USD exchange rate, causing fluctuations in the forex market. Forex traders should keep a close eye on these developments to make informed trading decisions.