- GBP/USD pulls back sharply from one-month highs amid the appearance of some dollar buying.
- Upbeat US PCE report could have reignited Fed rate hike bets and favor USD bulls.
- The bears could still wait for a sustained break below 1.2100 before making further bets.
The pair GBP/USD has made a sharp turn from 1.2250, the one-month high reached this Friday. The pullback remains unbroken throughout the early American session and dragged the pair to a fresh daily low around 1.2100 in the last hour.
The US dollar is making a strong intraday recovery from its lowest level since July 5th and is proving to be a key factor putting strong downward pressure on the GBP/USD pair. A modest recovery in US Treasury bond yields extends some support to the dollar, which receives an additional boost from the strength of US personal consumption expenditures (PCE report).
The US Bureau of Economic Analysis reported that the headline index accelerated to 6.8% y/y in June, from 6.3% previously. The core PCE price index – the Fed’s preferred gauge of inflation – rose to 4.8% yoy, versus 4.7% expected in May. Other data revealed that personal spending and personal income increased by 1.1% and 0.6%, respectively.
The upbeat data could have reignited speculation that the Fed will raise rates by 50 basis points at each meeting for the remainder of the year. This, coupled with a modest pullback in US equity futures, continues to support the dollar’s intraday bounce. That said, it would be wise to wait for some selling below 1.2100 before placing any bearish bets on GBP/USD.
Technical levels
Source: Fx Street
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