- GBP/USD rises to a new monthly high and is supported by a selling bias around the USD.
- Speculation that the Fed could pause the rate hike cycle and risk appetite weighs on the dollar.
- Doubts about further rate hikes from the Bank of England and Brexit woes prevent bulls from opening aggressive positions.
The pair GBP/USD you have returned a portion of your intraday profits up to a minimum of one month and pulls back near the 1.2620 arearising 0.20% during the European session on Friday.
On Friday, the pair gained positive traction for the third day in a row, also marking the sixth day of positive movement in the previous seven, and confirmed a bullish break above the 1.2600 level. The momentum took GBP/USD to its highest level since April 26 and was due to the selling trend around the US dollar.
Minutes from the Federal Open Market Committee (FOMC) meeting released on Wednesday suggested that the Fed could pause the rate hike cycle after two hikes of 50 basis points each in June and July, amid worsening economic prospects. Speculation was fueled by the release on Thursday of the US’s preliminary GDP report, which showed that the economy contracted at an annualized rate of 1.5% in the first quarter.
Doubts about the Federal Reserve’s ability to control inflation without plunging the economy into recession prolonged the recent decline in US Treasury yields. Indeed, benchmark 10-year US government bond yields fell to their lowest level in six weeks, which along with risk appetite dragged the dollar to a new one-month low.
Nevertheless, the diminishing likelihood that the Bank of England will raise interest rates further and the impasse in the relationship between the UK and the EU with respect to Northern Ireland, acted as a headwind for the British pound. This was the only factor that prevented the bulls from opening aggressive positions and prompted the GBP/USD intraday retracement of about 40 pips from the daily high.
In the absence of any major economic releases from the UK, the USD price dynamics will continue to influence the GBP/USD pair. Later in the American session, the release of the US core PCE price index, the Fed’s preferred gauge of inflation, could allow investors to take advantage of some short-term opportunities.
GBP/USD technical levels
Source: Fx Street
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