GBP/USD weakens after FOMC minutes as USD recovers

• Spot falls to test daily lows after Fed’s minutes. 
• DXY Futures rebound sharply on hawkish tone from the FOMC. 

The GBP/USD pair dropped to test daily lows at 1.4159 after the release of the FOMC minutes. Price fell from 1.4185 to 1.4159. So far it held above the lows and it was hovering around 1.470, flat for the day. 

The greenback gained momentum after “hawkish” minutes according to many market analysts. All members saw further tightening likely warranted, with a gradual approach, repeating the tone of the previous meetings. The surprise came with comments from some members who mentioned that the economic outlook implies a steeper rise in rates over the next years than previously expected. Many of the FOMC members were more confident that inflation would reach the target in the coming months and would stabilize around that level. 

The tone of the minutes boosted the US dollar, that trimmed losses across the board. With the recent retreat from the weekly highs it reached earlier today above 1.4200, Cable could post the first daily loss after a 3-day rally. 

The correction could signal some correction or stabilization ahead. The dollar received a boost from the minutes but is not clear if the positive momentum will last.

Levels to watch 

To the upside, GBP/USD continues to be unable to hold above 1.4200. If it manages to do so it could clear the way to more gains with potential targets at 1.4245 (Mar 26 high) and 1.4275. On the flip side, immediate support might lie at 1.4155/60 (daily low), 1.4095 and 1.4015.