GBP/USD rebounds from 1.2600, more pain seems real as DXY strengthens on hawkish Fed

• GBP/USD is displaying downside signs as the Fed has turned extremely hawkish.
• Fed Waller is in favor of a spree of 50 bps interest rate hikes till the Fed fixes the inflation mess.
• The BOE is more likely to announce a rate hike by 50 bps in its June monetary policy.

The GBP/USD pair has witnessed a pullback from its intraday low of 1.2600. Earlier, the asset witnessed a steep fall after slipping below 1.2641 as the US dollar index (DXY) displayed a power-pack buying action in its opening trade.

Investors poured liquidity again into the greenback on hawkish commentary from Federal Reserve (Fed) Governor Christopher Waller. In his speech at Institute for Monetary and Financial Stability, the Fed policymaker dictated that the Fed should continue the spree of 50 basis points (bps) interest rate hikes in each of its monetary policy meetings till the time it finds a substantial reduction in the interest rate. The commentary has scared the investing community as more jumbo rate hike announcements by the Fed could accelerate the recession fears.

On the dollar front, the DXY is holding itself above 101.60 after hitting a high of 101.76. The asset is advancing higher amid uncertainty over the release of the US Nonfarm Payrolls (NFP), which are due on Friday. A preliminary estimate for the economic catalyst is 320k against the prior print of 428k.

On the pound front, mounting inflation pressures are impacting the real income of the households in the UK. The annual Consumer Price Index (CPI) figure has climbed above 9%. The inflation mess in the UK demands a quick efficient response from the Bank of England (BOE). According to the market estimates, an interest rate elevation by 50 bps should be on the cards.