- GBP/USD attracts some buyers on Thursday amid a modest USD pullback from a multi-week high.
- Falling US bond yields weigh on the dollar, although expectations of a hawkish Fed help limit losses.
- Speculation that the Bank of England rate hike cycle is coming to an end is helping to limit the pair’s rise.
The pair GBP/USD gains some ground on Thursday and reverses some of the previous day’s decline just below the psychological 1.2000 level. The pair is holding on to its modest intraday gains during the first half of the European session and is currently sitting just above 1.2050, though lacks continuation.
The pullback in US Treasury yields caused the dollar to pull back modestly from a six-week high hit on Wednesday, which in turn provided some support for GBP/USD. Having said that, prospects of further monetary policy tightening by the Fed, coupled with recession risks, help limit the dollar’s decline. Apart from this, expectations that the current Bank of England (BoE) rate hike cycle is coming to an end help keep any significant rise in the pair at bay.
Investors seem convinced that the US central bank will maintain its hawkish stance and are now pricing in at least a 25 basis point hike in the next two meetings of the FOMC in March and May. These expectations were reaffirmed by Tuesday’s US CPI report and recent comments by several FOMC officials, who stressed the need for further rate hikes to fully control inflation. This, in turn, could curb aggressive bearish expectations around the dollar and limit the GBP/USD pair.
On the contrary, Softer-than-expected UK consumer inflation figures released on Wednesday ease pressure on the Bank of England to carry out aggressive interest rate hikes in the future. This warrants some caution on the part of GBP/USD bulls before positioning for any further intraday upside. The US economic calendar, which will feature the Philadelphia Fed Manufacturing Index, weekly initial jobless claims, building permits and housing starts, will offer some short-term opportunities in the pair. .
GBP/USD technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
