GBP/USD hovers above 1-week low ahead of Fed Chair Powell’s speech

The GBP/USD currency pair was a notch firmer at the start of the week, but still hovered above Friday’s one-week low, as risk sentiment remained frail amid escalating tensions in the Middle East.

Israeli forces are preparing a ground offensive into the Gaza Strip, aiming to root out the Palestinian group Hamas, while targeting “every place, every commander, every operator.”

“I view what’s going on in Israel as a regional conflict, which typically does not have meaningful impacts on financial markets over time,” David Chao, Invesco’s global market strategist for Asia Pacific ex-Japan, was quoted as saying by Reuters.

“I don’t see it altering growth trajectories of the major economies nor does it make the Fed more hawkish. If anything, I think the Fed is less inclined to tighten going forward given the perception of heightened risks.”

Meanwhile, market players are now expecting a speech by Federal Reserve Chair Jerome Powell on October 19th before the Economic Club of New York, as the central bank’s blackout period begins ahead of its November policy meeting.

Powell’s remarks will be closely watched for hints on how much further interest rates could rise, after US consumer prices were reported to have risen more than anticipated in September.

The Federal Reserve is largely expected to keep borrowing costs on hold next month. There is an almost 32% chance of a rate hike in December priced, according to the CME’s FedWatch tool.

In terms of macro data, US retail sales and UK employment figures will also be on investors’ radar this week.

As of 7:47 GMT on Monday GBP/USD was edging up 0.28% to trade at 1.2176. Last week, the major Forex pair went down as low as 1.2122. The latter has been the pair’s weakest level since October 6th (1.2105).