- GBP/USD gains some positive traction on Thursday, though has a hard time capitalizing on the move.
- The Fed’s dovish outlook and softer risk sentiment benefit the safe-haven USD and cap the pair’s gains.
The pair GBP/USD has retraced from the daily high at 1.3106 touched at the start of the European session and falls around 1.3080-1.3085 region, still positive on the day.
The pair gained some positive traction during the first half on Thursday and pulled back from the 3-week low around the 1.3045 area hit the previous day. However, rally lacked bullish conviction and found no acceptance above 1.3100 level amid the appearance of new purchases around the US dollar, reinforced by the aggressive outlook of the Fed.
Indeed, minutes from the March 15-16 FOMC meeting released on Wednesday showed that policymakers were willing to raise interest rates by 50 basis points amid concerns that inflation had spread through the economy. The minutes also showed general agreement on reducing the central bank’s huge balance sheet at a maximum rate of $95 billion a month to tighten financial conditions.
The aggressive plans of the Fed, coupled with diminishing hopes for a diplomatic solution to end the war in Ukraine, weighed on global risk sentiment. This was evident from a weaker tone around equity markets, which further fueled some safe-haven money flows into the US dollar and helped limit any significant gains for GBP/USD.
There is no economic data release from the UK, which suggests that the price dynamics around the USD will play a key role in influencing the GBP/USD pair. At the start of the American session, investors will take cues from US initial jobless claims data. This coupled with risk-on sentiment will boost USD demand and could give GBP/USD some momentum.
GBP/USD technical levels
Source: Fx Street
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