- GBP/USD is trading in a tight range during the European session on Thursday.
- Expectations of lower Fed rate hikes keep dollar bulls on the back foot and provide some support for the pair.
- Traders prefer to wait for the release of advanced Q4 GDP before opening aggressive positions.
The pair GBP/USD It is stabilizing after the previous day’s positive move and trading in a tight range during the early hours of the European session on Thursday, in a bit of a mini bullish flag pattern. the pair manages to stay around the 1l2400 level and they remain close to the highest level since June 2022, set on January 23. The general trend in the medium term remains bullish, with the default expectation that it will continue. A break above the short term highs at 1.2418 would open the doors to the January highs at 1.2447, and probably beyond. A lot depends on the US data, with two key releases: Q4 GDP and Core PCE due today and tomorrow.
The underlying bearish sentiment around the US dollar turns out to be a key factor that continues to act as a tailwind for GBP/USD. Indeed, the DXY dollar index, which measures the dollar’s performance against a basket of currencies, is weakening near eight-month lows amid some increasingly firm expectations of less aggressive monetary policy tightening by the Fed. Markets now seem convinced that the US central bank will soften its hawkish stance and have been pricing in a smaller 25 basis point rate hike in February. This curbs the recent rise in US Treasury yields and weakens the dollar.
On the other hand, the pound sterling is supported by the speculation that high consumer inflation will keep pressure on the Bank of England (BoE) to continue raising interest rates. This, in turn, favors GBP/USD bulls and supports prospects for further appreciation in the near term. However, traders seem reticent, preferring to stay on the sidelines before the US Q4 Advanced GDP is released, due to be released early in the North American session. Also, on Friday, the US core PCE price index will be released, which will have a decisive influence on the Fed’s interest rate strategy.
Next, attention will turn to the main central bank events in the coming week, with the outcome of the FOMC’s two-day policy meeting on Wednesday and the Bank of England’s decision on Thursday. This will help determine the next directional move for the GBP/USD pair. Meanwhile, USD price action could provide some impetus in the absence of relevant UK economic releases. However, the fundamental background appears to be leaning firmly in favor of the bulls, suggesting that any significant pullback is more likely to be bought and kept capped, at least for now.
GBP/USD technical levels
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.
