- The renewed selling bias around the USD helps GBP / USD regain positive traction on Friday.
- Pessimistic expectations from the Fed and falling US bond yields continue to weigh on the USD.
- Investors await the release of US retail sales data for further directional momentum.
The pair GBP/USD moves with a positive bias during the first half of the European session on Friday, although lacks continuation purchases. At the time of writing, the pair is trading around the 1.4070-65 region, up 0.10% on the day.
The pair has regained positive traction on Friday and has built on the previous day’s rebound from the key psychological level of 1.4000. amid the emergence of some new sales around the US dollar. Despite signs of rising inflation in the US, the Fed’s stubbornly pessimistic stance has not helped the USD capitalize on this week’s strong rally from the lowest level since February 25.
Fed Vice Chairman Richard Clarida said Wednesday that weak job growth and strong inflation in April had not changed the central bank’s plan to maintain a flexible monetary policy. Furthermore, Fed Governor Christopher Waller said Thursday that the Fed would not raise rates until it sees inflation above target for a long time or excessively high inflation.
Investors now appear to be convinced that Positive economic data is unlikely to prompt an immediate change in the Fed’s stubbornly pessimistic stance. This has been seen as a key factor that has continued to act as a headwind for the USD. Apart from this, a new momentum in the stock markets has further affected the safe-haven USD.
On the other hand, sterling has remained underpinned by optimistic prospects for a UK economic recovery after the pandemic. The combination of factors has provided some support for GBP / USD, although the rally has lacked bullish conviction. Market participants now appear to be waiting for new clues in Friday’s release of US retail sales figures.
The data will be closely scrutinized for clues as to whether the upward pressure on prices will persist and influence the Fed’s rate expectations. This, along with US bond yields, will play a key role in driving the USD momentum in the short term and could generate further directional momentum to the GBP / USD pair.
GBP / USD technical levels
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