- GBP/USD lacks any firm intraday direction and seesaws between tepid gains/minor losses.
- A further rise in the US bond yields lends support to the USD and caps gains for the major.
- Rising bets for another 25 bps BoE rate hike in May continue to underpin the British Pound.
The GBP/USD pair struggles to gain any meaningful traction on Thursday and oscillates in a narrow trading band through the first half of the European session. The pair is currently placed just above mid-1.2400s, nearly unchanged for the day, though the downside seems cushioned amid subdued US Dollar (USD) price action.
The uncertainty over the Federal Reserve’s rate-hike path, along with a slight recovery in the global risk sentiment, fail to assist the safe-haven buck to capitalize on the overnight bounce from a nearly two-week low and lend support to the GBP/USD pair. Fresh concerns about banking contagion risks in the United States (US), along with the debt ceiling standoff and looming recession fears, have been fueling speculations about an imminent rate cut by the Fed later this year.
The markets, however, have been pricing in a greater chance of another 25 bps lift-off at the next FOMC policy meeting in May. This remains supportive of a further rise in the US Treasury bond yields, which acts as a tailwind for the Greenback and seems to cap the upside for the GBP/USD pair, at least for the time being. Moreover, the recent repeated failures to find acceptance above the 1.2500 psychological mark warrants some caution before positioning for any further gains.
Traders also seem reluctant and wait on the sidelines ahead of the release of the Advance US Q1 GDP report, due later during the early North American session. The data, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair. The market attention will then shift to the release of the Fed’s preferred inflation gauge – the US Core PCE Price Index on Friday.
In the meantime, expectations for another 25 bps interest rate hike by the Bank of England (BoE) in May could underpin the British Pound and further contribute to liming the downside for the GBP/USD pair. The bets were lifted by last week’s release of stronger UK wage growth data and consumer inflation figures, which, in turn, favours bullish traders and supports prospects for some meaningful near-term appreciating move for the major.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
The British Pound (GBP) has traded within an established range against its US Dollar (USD) counterpart for much of the week leading up to the release of the US second quarter Gross Domestic Product (GDP) figures. While there may be a slight pick-up in volatility, analysts anticipate the trend of range-bound movements to continue.
Since Monday, GBP/USD has remained tightly bound between the mid-1.2400s in the upper limit and the 1.2350 support level in the lower end. The pair has had no major movements within the range despite several significant economic events being announced this week.
At the beginning of the week, it was announced that the US Federal Reserve would maintain its current rate of interest. The news had a minimal impact on the movement of the pair. Meanwhile, British jobs data published on Thursday indicated an overall drop in unemployment, but the pair continued to trade within its range for the most part.
Looking ahead, the market is now awaiting the release of the US GDP figures for the second quarter at 8:30 am EDT. GDP growth is seen as the most important of all economic data releases and it is expected to show a sharp decrease compared to the previous quarter.
Any downside surprises could result in a sharp pick-up in GBP/USD volatility, however, analysts anticipate the pair to remain in its current range over the short-term. In the medium to long-term, GBP/USD may extend its gains if the outlook for the US economy remains weak, which could be seen favorable for the British currency.