- GBP/USD pulls back from multi-week highs amid a modest dollar recovery on Thursday.
- Reducing expectations for more aggressive Fed rate hikes could act as a dollar headwind.
- The fundamental background supports the prospects for some buying at lower levels.
The pair GBP/USD fails to capitalize on the previous day’s breakout momentum beyond the psychological level of 1.1500 and down from its highest level since September 13 played earlier this Thursday. The pair remains on the defensive during the European session and is flirting with the round level of 1.1600.
A intraday rally in US Treasury bond yields. It helps the dollar recover from a one-month low, which in turn acts as a headwind for the GBP/USD pair. That said, the speculation that the Federal Reserve could soften its hawkish stancein the middle of signs of slowdown in the US economy, could deter dollar bulls from opening aggressive positions. Additionally, the positive tone around equity markets could limit the dollar as a haven and continue to provide some support to the pair.
The pound sterling, for its part, is underpinned by the appointment of the new Prime Minister of the United Kingdom, Rishi Sunak. Market participants see Sunak as someone who can bring stability to recent volatile markets and keep the UK economy stable. Sunak also committed to fix Truss administration bugs and to get the country out of the current economic crisis, boosting investor confidence. This, in turn, supports the prospects for a further short-term appreciation move for the GBP/USD pair.
Even from a technical perspective, the previous day’s sustained break through the 1.1475-1.1480 area and the .1500 level adds credence to the positive outlook. Therefore, any significant corrective slippage could now be seen as a buying opportunity and remain limited, at least for now. Traders are now awaiting the US third quarter GDP report for further momentum. Weekly durable goods orders and initial jobless claims will also be published on Thursday’s economic docket.
GBP/USD technical levels
Source: Fx Street
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