- A combination of supporting factors helps GBP / USD attract some lower buying on Wednesday.
- UK macroeconomic releases reaffirm optimistic outlook and support sterling.
- Softer US bond yields limit USD rally ahead of US CPI.
The pair GBP/USD has recovered initial losses to the 1.4110 region and remains virtually unchanged on the day, just below the 1.4150 level, during the European session on Wednesday.
The pair has struggled to capitalize on its recent strong gains recorded in the last three days and has seen some sales during the first half of the commercial action Wednesday. The prevailing sentiment of risk aversion has prompted some safe haven money flows to the US dollar and it has been seen as a key factor that has put pressure on the GBP / USD pair.
Global risk sentiment has taken a hit amid a Escalation of the conflict between Israel and the Palestinian militant group, sparked by the riots in Jerusalem’s Al-Aqsa Mosque. This adds to concerns that mounting inflationary pressure could force the Fed to raise rates earlier than expected, which has dampened investor confidence.
However, the initial decline has turned out to be short-lived and has quickly been bought amid the optimistic outlook for the UK economy. This has been reinforced by Wednesday’s upbeat macroeconomic releases in the UK, which showed that the economy expanded 2.1% month-on-month in March. This has been accompanied by an upward revision from the previous month’s reading.
What’s more, UK industrial / manufacturing production figures and goods trade balance also performed better than preliminary estimates. This, in turn, has helped the GBP / USD pair to attract some buying at lower levels, near the 1.4100 region. Apart from this, a modest pullback in the USD from the daily highs has offered some support to the pair.
A softer tone around US Treasury yields has limited the USD’s attempt to rally from lows of more than 10 weeks hit the previous day. That said, investors seem reluctant to open aggressive bullish positions around GBP / USD and prefer to wait for the critical US CPI report, to be released later at the start of the American session.
GBP / USD technical levels
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