- GBP / USD gains some positive traction on Friday, although it lacks tracking.
- Expectations of a rate hike from the BoE benefit the GBP and offer support to the pair.
- A combination of factors helps to reactivate the demand for the USD and limits the rise of the pair.
The pair GBP/USD moving with a slight positive bias during the European session on Friday, with the bulls now waiting for a sustained move above the 1.3800 level.
Following the previous day’s failure before the 1.3820-25 resistance zone, the GBP / USD has regained upward traction on Friday and now looking to take advantage of this week’s recovery from the 1.3700 region. That said, a good pickup in demand for the US dollar, bolstered by a combination of factors, has acted as a headwind for the pair.
As investors looked past Thursday’s sad US GDP figure, the USD got some support from a strong rally in US Treasury yields and cautious market sentiment. The benchmark 10-year US government bond yield again shot above the 1.60% level amid prospects for an early tightening of monetary policies by the Fed.
The markets seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. This, coupled with signs of a global economic slowdown, has been fueling concerns about stagflation risk and weighed on investor sentiment, lending some support to the safe-haven US dollar.
Secondly, the pound sterling was affected by the nervousness of the BrexitAlthough expectations of an imminent rate hike from the Bank of England helped limit losses. In recent Brexit-related events, the UK Prime Minister, Boris Johnson said the conditions to invoke Article 16 had been met unless they saw rapid progress on the Northern Ireland protocol.
This occurs after a UK-France controversy over post-Brexit fishing rights, which could prevent bullish investors from opening aggressive positions around GBP / USD. Also, the repeated pullbacks from the 1.3820-25 supply zone make it prudent to wait for a strong continuation buy before positioning for additional gains.
The key point on Friday will be the publication of the underlying PCE price index of the United States, which will set the tone for the main meetings of central banks next week: BoE and FOMC. Apart from this, US bond yields and broader market risk sentiment will influence USD price dynamics and provide some boost to GBP / USD.
GBP / USD technical levels
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