GBP/USD hits weekly highs near 1.2669 but pulls back towards 1.2615

• The pound is about to post consecutive weekly gains, rising 0.94%.
• The Fed’s favorite inflation gauge is moving away from the 5% threshold, showing signs that elevated prices could be topping soon.
• UK Prime Minister Boris Johnson said the UK could avoid a recession.
• GBP/USD Price Forecast: If Bulls Fail to Reclaim 1.2700, Expect Selling Pressure to Mount and Pair Heading for Retest of All-Time Low.

The GBP has advanced steadily over the past week, gaining 0.45% after the Commerce Department reported that the Fed’s preferred gauge of inflation, core personal consumption expenditure (PCE), rose 4.9%, in line with estimates, but down from 5.2% in March. At 1.2614, the GBP/USD continues to extend its gains during the American session.

Global equities reflect a positive mood, rising on Friday. Investors are beginning to shed fears that inflation will continue to rise. In addition, receding core inflation could deter the Federal Reserve from raising rates as aggressively as market players had anticipated, pushing 10-year Treasury yields to their all-time high of 3.20. % earlier this month.

Before the opening of Wall Street, other data were known. Consumer spending rose 0.9% last month and beat estimates as consumers boosted purchases of goods and services, a sign that could underpin US economic growth in the second quarter, amid growing concern about a recession.

Analysts at ING wrote in a note that the inflation reading is encouraging, though they reiterated that bringing it back to target will take time. “We think we need to see three conditions for inflation to come down quickly significantly. First, an improving geopolitical environment that will drive down energy prices, which seems unlikely given Russia’s actions. Second, an improving supply chain environment, which also seems unlikely given China’s “zero” covid policy and the possibility of strikes at US ports And third, we would need to see a large increase in supply of to mitigate rising labor costs, something that also does not seem to be foreseen yet,” the ING analysts added.

Meanwhile, UK Prime Minister Boris Johnson commented that the UK could avoid a recession in the coming months, despite the fact that the latest report on UK inflation, which stood at 9%, reached its highest level in forty years. Even the Bank of England expects a contraction in growth at the end of the year and a scenario of prolonged stagnation.

Elsewhere, the US Dollar Index, a gauge of the value of the USD’s value against its peers, rebounds from weekly lows and is up 0.10% to settle at 101.850.

GBP/USD Price Forecast: Technical Outlook

From a daily chart point of view, GBP/USD still has a bearish bias. During the day, the currency failed to break above the daily high of May 4 at 1.2638 and pulled back towards 1.2610, well below the daily moving averages (DMA). However, the RSI is showing some signs of a bullish turn, but GBP/USD bulls need to reclaim 1.2700 to change the bias to neutral-up.

A failure of the above would keep the pair vulnerable, sending the pair towards the daily low of May 20 at 1.2436, followed by the low of May 17 at 1.2315, and the low of the year at 1.2155.

Technical levels