GBP/USD bounces off weekly lows and trades above 1.2530 ahead of FOMC minutes

• The pound breaks Tuesday’s losses and recovers some ground, gaining 0.42% on the week.
• Positive market sentiment boosts pound outlook, despite dollar strength.
• GBP/USD Price Forecast: Break Above 1.2700 Could Lead To 1.3000; Otherwise, more downward pressure could enter the market if the currency trades below 1.2470.

The British pound recovers some ground during the North American session on Wednesday. After bouncing near the weekly lows around 1.2480, the GBP/USD it has broken back above 1.2500, reaching 1.2550 due to improved market sentiment.

Market Sentiment Drives GBP Outlook

“Investors” are shrugging off the Fed’s concern that aggressive tightening could spark a recession. On Tuesday, Atlanta Fed President Raphael Bostic, who leans toward the specter of hawks, sounded bearish, saying the US central bank could pause its tightening cycle once it has raised rates to threshold of 2%, so that the central bank can witness how the economy behaves.

Meanwhile, global stocks trim some of their weekly losses, reflecting the bullish move as the dollar rises. The dollar index, which measures the value of the dollar against a basket of six currencies, recovers the 102.00 mark, gaining 0.40%, and limiting the rise of GBP/USD. The 10-year US Treasury yield is flat around the 2.752% mark.

GBP/USD Price Prediction: Technical Outlook

The GBP/USD has a bearish bias, though it is making up some ground. However, a solid resistance area is looming at the daily highs of May 4 near 1.2638, a resistance just off a falling trendline from four months ago that passes above 1.2700. That ceiling zone would be difficult for the bulls in the pair to break, but if they do, the 1.3000 zone can be retested.

Otherwise, a break below 1.2470 would expose the pair to further selling pressure which could lead to a retest of year lows around 1.2155.