- GBP / USD marks a nice bounce from the new yearly lows hit earlier this Friday.
- A modest profit take around the USD is seen as a key factor offering some support for the pair.
- Brexit jitters and last week’s BoE decision limits any significant hikes.
The pair GBP/USD has moved higher and away from the new annual lows, rising back above the 1.3400 level during the European session on Friday. At time of writing, the pair is holding around that region, having set an intraday high at 1.3410.
The pair found some support near 1.3350 and staged a modest rebound from lowest level since December 2020 touched early this Friday, breaking a three-day losing streak. The US dollar witnessed some profit taking after hitting 16-month highs, which in turn was seen as a key factor that extended some support to the GBP / USD pair. That being said, any significant recovery still seems elusive and the recovery move attempt runs the risk of ending quite quickly.
Warmer-than-expected U.S. consumer inflation figures released on Wednesday reaffirmed the market expectations that the Fed would be forced to raise interest rates sooner rather than later. In fact, Fed fund futures indicate that the rate hike could come as early as July 2022. This, along with the high yields on US Treasuries, should help limit any significant corrective declines in the USD and prevent the pair’s bulls from opening aggressive positions around GBP / USD amid Brexit troubles.
Britain has threatened to suspend part of the Brexit deal which belongs to Northern Ireland. Secondly, the European Union is preparing a package of retaliatory measures if the UK activates Article 16. The two sides will enter into new negotiations on Friday in an attempt to avoid an imminent trade war. Apart of this, the pessimistic decision of the Bank of England last week it could help limit any significant gains for the British pound.
Therefore, it will be wise to wait for a strong continuation buy before confirming that the recent rejection of the very important 200-day SMA is over. Market participants are now waiting for a speech scheduled by BoE MPC member Jonathan Haskel to give a bit of a boost. At the start of the American session, the preliminary Michigan consumer sentiment index could influence the USD price dynamics and generate some opportunities around the GBP / USD pair.
GBP / USD technical levels
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