GBP/USD recovers early lost ground and climbs back above 1.2255

• GBP/USD found decent support ahead of the weekly low following the release of UK PMIs.
• The strength of the crosses, derived from the fall of the EUR/GBP, further benefited the GBP.
• Aggressive expectations from the Fed continued to act as a tailwind for the dollar and could cap the pair.

The pair GBP/USD attracted some buying at the 1.2170 area on Thursday and recovered some 80-85 pips from near the weekly low hit the previous day. The pair traded just above the 1.2250 area during the early American session, almost unchanged on the day.

The British pound was supported by the better than expected UK PMI data for June, and by the change in trend in the EUR/GBP pair, due to the dismal PMIs in the Eurozone. This, in turn, was seen as a key factor that offered some support to the GBP/USD pair, although a combination of factors could stop the bulls from making aggressive bets.

The US dollar was again in demand amid firm expectations that the Fed will raise interest rates at a faster pace to combat persistent inflation. In fact, markets have been pricing in another 75 basis point rate hike at the next FOMC meeting in July. Furthermore, the worsening global economic outlook provided additional support for the safe-haven dollar.

Turning to economic data, the US Department of Labor recorded 229,000 initial jobless claims in the week ending June 18, versus 227,000 forecast. The previous month’s data was also revised higher to 231,000, from 229,000 previously. However, this did not dent the dollar’s intraday bullish tone, which acted as a headwind for the GBP/USD pair.

Aside from this, speculation that the Bank of England would opt for a more gradual approach to raising interest rates helped to cap GBP/USD. This, coupled with the impasse between the UK and the European Union over the Northern Ireland protocol to the Brexit deal, supports prospects for a significant decline in the main currency.

Technical levels