- GBP/USD regains positive traction on Monday amid a selling bias around the USD.
- Diminishing odds of a more aggressive Fed rate hike continue to weigh on the dollar.
- Softer risk sentiment and a rebound in US bond yields limit USD losses and limit the pair’s upside.
The pair GBP/USD breaks back above the 1.2200 level during the first part of the European session, attracting new purchases on the first day of a new week. At the time of writing, the pair is approaching one-month highs around 1.2245reached on Friday.
The US dollar is weakening near its lowest level since July 5, which is proving to be a key factor lending support to the GBP/USD pair. market participants continue to reduce their expectations of more aggressive rate hikes by the Federal Reserve amid concerns about an economic downturn. This largely overshadows Friday’s higher US PCE personal consumption spending and continues to weigh on the dollar.
In contrast, the pound sterling is supported by the growing expectations in favor of a 50 basis point rate hike by the Bank of EnglandAlthough, with that said, a combination of factors could cap GBP/USD’s gains. The recent bullish move in stock markets has petered out amid growing fears of a recession. This, coupled with a modest rebound in US Treasury yields, should help limit the dollar’s decline and act as a headwind for the pair, at least for now.
Investors may also refrain from opening aggressive positions and would prefer to wait on the sidelines ahead of Thursday’s Bank of England policy meeting. Aside from this, important US macro data scheduled for the beginning of a new month would determine the next directional move for the GBP/USD pair. A fairly busy week begins with the release of the ISM Manufacturing PMI, which could give the pair some momentum at the start of today’s American session.
GBP/USD technical levels
Source: Fx Street
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