- GBP/USD pulls back from the highest level since February reached earlier this Wednesday.
- A further rise in US bond yields revives demand for dollars and puts some pressure.
- The fundamental background supports the prospects for further near-term gains for the pair.
The pair GBP/USD It retreats from the 1.2360 zone, or its highest level since February 3 hit this Wednesday and trades with modest losses during the early American session. For now, the pair appears to have snapped a two-day winning streak, though it manages to stay comfortably above 1.2300, or daily lows.
The US dollar (USD) is gaining some positive traction amid a further rise in US Treasury yields and is seen as a key factor acting as a headwind for the US dollar. GBP/USD pair. Hopes that a full-blown banking crisis can be averted fuel speculation that the Federal Reserve (Fed) could maintain its tightening policy, which, in turn, continues to push US bond yields higher. That said, the prevailing bullishness in equity markets, characterized by a generally positive tone, could prevent traders from making aggressive bullish bets on the safe-haven dollar.
In the absence of negative news from the banking sector in the last two weeks, the acquisition of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the risk of contagion. In addition, the US regulatory authorities reiterated the soundness of the banking system and contributed to reversing the recent negative sentiment in the markets. Separately, Bank of England Governor Andrew Bailey told the House of Commons Treasury Select Committee on Tuesday that the UK banking system is in a strong position and is not experiencing stress related to the global turmoil. in the banking sector.
Apart from this, the bets for further rate hikes by the BoE continue to act as a tailwind for the British pound. Expectations were reaffirmed after the British Retail Consortium (BRC) reported that UK store prices rose from 8.4% previously to 8.9% in the year to March, the highest reading on record since the survey began in 2005. In addition, food prices increased by 15.0% throughout the year, also a record figure. This, in turn, supports the prospects for further short-term appreciation for GBP/USD, warranting some caution before positioning for any significant corrective pullback.
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.
