GBP/USD rises to 1.2230 area amid renewed USD selling bias

• GBP/USD attracts buying at the 1.2180 area amid fresh selling around the USD on Thursday.
• Diminishing odds of a further Fed rate hike in September and risk appetite weigh on the USD.
• The bulls might wait for some continuation buying before positioning themselves for a further move higher.

The pair GBP/USD recovers almost 50 pips from the intraday low and reaches a new daily high, around the area of ​​1.2230during the first hour of the European session.

The US dollar is struggling to take advantage of its modest bounce and is met with fresh selling on Thursday, which in turn offers some support to the GBP/USD pair. US consumer inflation numbers softer than expectedforcing investors to lower expectations of a more aggressive rate hike by the Fed. Apart from this, a positive tone around equity markets weighs on the safe-haven dollar.

That said, a combination of factors should help limit any further dollar losses and cap GBP/USD gains, at least for now. The growing concern about a global economic downturn, coupled with US-China tensions over Taiwan, could curb the latest optimism in the markets. On the other hand, the statements of the Fed officials, who were very aggressive, should be a stimulus for the dollar.

Indeed, Chicago Fed President Charles Evans noted that inflation remains unacceptably high and expects the Fed to continue raising the interest rate to 3.25%-3.50% by the end of the year. Separately, Minneapolis Fed President Neel Kashkari said the Fed is far from declaring victory over inflation and had recommended the interest rate at 3.9% by the end of 2022 in June economic projections. .

In addition, the gloomy economic outlook from the Bank of England they should act as a headwind for the British pound and also help to limit the GBP/USD pair. It should be remembered that the UK central bank indicated last week that a prolonged recession would start in the fourth quarter. Therefore, the market’s attention is now focused on the UK’s preliminary GDP report for the second quarter, due to be released on Friday.

Even from a technical point of view, the previous day’s retracement from near the monthly high warrants caution for the bulls. Therefore, it is prudent to wait for buying beyond 1.2250 before positioning for any further upside moves. Investors are now expecting the US Producer Price Index (PP) to make a further push later in the American session today.

GBP/USD technical levels