- GBPUSD is coming under some selling pressure amid a modest rebound in demand for the dollar.
- The rally in US bond yields and cautious markets benefit the dollar.
- The decline looks limited as traders look forward to the UK government’s financial plan.
The pair GBPUSD pulls back sharply from the daily high of 1.1958 and falls to new daily lows around the 1.1850 zone during the first half of the European session.
US dollar gains some positive traction and reverses the modest losses of the previous day, which turns out to be a key factor putting some pressure on GBPUSD. Upbeat US retail sales data on Wednesday may have forced investors to lower their expectations for a less aggressive Fed tightening policy. This follows from a rebound in US Treasury yields, coupled with cautious market sentimentoffers some support to the safe-haven US dollar.
Investors seem concerned about the possibility that a new outbreak of COVID-19 in China will further affect activity against a backdrop of rapidly rising borrowing costs. Apart from this, the persistent geopolitical tension is weighing on global risk sentiment. That said, the growing acceptance that the Bank of England will continue to raise borrowing costs to combat stubbornly high inflation could act as a tailwind for sterling. This, in turn, should help limit any deeper losses for the GBPUSD pair.
The operators too may prefer to wait for the UK government’s financial plan before opening aggressive positions and positioning yourself for a firm direction in the short term. Chancellor Jeremy Hunt will release his Fall Budget later today and expected to reduce the size of the tax gap. This will play a key role in boosting the sentiment surrounding the British pound. Aside from this, traders will look to US macro data as a reference to take advantage of some short-term opportunities around the GBPUSD pair.
On Thursday’s US economic calendar will be the Philadelphia Fed manufacturing index and the usual initial weekly jobless claims later in the American session. This, along with speeches from a number of FOMC members and broader market risk sentiment, will influence USD price dynamics and provide a significant boost to GBPUSD.
GBPUSD technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
