- GBP/USD pulls back from a multi-month high amid a modest rebound in demand for dollars.
- The rally in US bond yields prompts some short dollar positions amid sparse trading.
- Less aggressive Fed rate hike bets could cap the dollar and support the pair.
The pair GBP/USD it falls on Friday and is away from its highest level since August 12, around the 1.2150-1.2155 area touched on Thursday. The pair remains on the defensive during the early North American session and is currently near the daily low around the 1.2065-1.2060 region.
As investors digest Wednesday’s dovish FOMC meeting minutes, the US dollar attracts some buyers on the last day of the week and acts as a headwind for GBP/USD. A modest rebound in US Treasury yields turns out to be a key factor driving some short positions around the dollar amid relatively poor trading conditions. Apart from this, the dollar recovery attempt lacks an obvious fundamental catalyst and risks fading quickly.
Investors seem convinced that the Federal Reserve will slow the pace of monetary policy tightening and have already priced in a relatively minor rate hike of 50 basis points at the December meeting. Apart from this, a generally positive risk tone could help limit further gains in the safe-haven dollar. This, in turn, should provide some support for the GBP/USD pair and help limit any deeper losses.
In addition, expectations that the Bank of England will continue to raise borrowing costs to combat persistent inflation are rising. This could support the sterling and supports the prospects for some dip buying to emerge around the GBP/USD pair. In the absence of relevant economic data, the fundamental background warrants caution before positioning for a further decline. However, prices remain on track to record gains for the third week in a row.
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.