GBPUSD clings to gains near 1.1900, lacks bullish conviction

• GBPUSD gains some positive traction on Friday amid subdued USD price action.
• A combination of factors limits the fall of the dollar, which limits the rise of the pair.
• A bleak outlook for the UK economy is helping to constrain the sterling.

The pair GBPUSD is holding on to its modest intraday gains at the start of Friday’s European session and is around the 1.1900 level.

As investors look past an unimpressive £55bn UK government tax plan, a combination of factors helped GBPUSD regain positive traction on the final day of the week. The Expectations that the Bank of England will continue to raise rates to combat persistently high inflation act as a tailwind for sterling. Apart from this, the monthly data of the retail sales in the United Kingdom, which was better than expectedoffer some support for the pair amid subdued US dollar price action.

However, the dollar’s decline remains subdued amid prevailing caution. The concern over economic difficulties stemming from a new outbreak of COVID-19 in China, coupled with geopolitical tensions, continue to weigh on investor sentiment. Apart from this, the previous day’s aggressive comments from the president of the St. Louis Fed, James Bullard, in which he affirmed that monetary policy is not yet in a range that is considered restrictive enough to reduce inflationfavor dollar bulls.

Apart from this, the gloomy outlook for the UK economy suggests that the path of least resistance for GBPUSD is down. In fact, the UK Office for Budget Responsibility (OBR) UK GDP is forecast to plunge 1.4% next year, up from 1.8% growth forecast in March. Therefore, any further intraday positive move could still be seen as a selling opportunity and is likely to limit the pair’s advance. Traders are now awaiting speeches by external members of the Bank of England’s Monetary Policy Committee, Catherine Mann and Jonathan Haskel, and existing US house sales data for further impetus.

GBPUSD technical levels