- GBP/USD defends the 1.2100 level and stops its intraday pullback from a one-month low.
- A technical pullback in the US forces the dollar to cut some of its gains and offers some support.
- UK political uncertainty regarding Brexit warrants some caution before making aggressive bullish bets.
The pair GBP/USD It finds some support near 1.2100 and stops its intraday pullback from the 1.2200 area, or a nearly one-month high hit earlier this Thursday. The pair recovered a few pips during the early American session after the release of the US GDP flash report.
According to the first estimate released by the US Bureau of Economic Analysis, the world’s largest economy contracted at an annualized rate of 0.9% during the April-June period. The reading comes in worse than the 0.4% growth estimate and follows a 1.6% contraction in the previous quarter, confirming a technical recession. The US dollar trims some of the gains from the intraday rally, which in turn helps the GBP/USD pair bounce back towards the 1.2150 area.
The data, however, added to growing market concerns about a global economic downturn and continued to weigh on investor sentiment. This is evident from the generally weaker tone around US equity futures, which, coupled with a rally in US Treasury yields, could offer support to the haven dollar. Therefore, it would be prudent to wait for strength to hold beyond 1.2200 before positioning for any GBP/USD appreciation move.
On the other hand, the downward trend is likely to be dampened, at least for the time being, in the wake of growing bets on a 50 basis point rate hike by the Bank of England at its next 2020 monetary policy meeting. August. The mixed environment further warrants some caution for aggressive traders amid UK political uncertainty and Brexit woes.
Technical levels
Source: Fx Street
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