- GBPUSD gains some positive traction on Friday and reverses some of the previous day’s losses.
- A positive risk tone weighs on the safe-haven dollar and offers support for the pair.
- The BoE’s gloomy outlook for the UK economy could act as a headwind for the British pound.
- A tougher Fed stance would limit USD losses and cap the pair ahead of the NFP.
The pair GBPUSD recovers from the two-week low around the 1.1150 area hit this Friday and maintains its buying tone during the first half of the European session. Currently situated below 1.1250, the pair seems to have stopped its recent pullback from a multi-week high amid modest US dollar weakness.
The positive tone around equity markets turns out to be a key factor putting some downward pressure on the dollar as a safe haven. However, high yields on US Treasury bonds, bolstered by the prospects of a further tightening of the Federal Reserve’s monetary policy should help limit the fall of the dollar. Indeed, Fed Chairman Jerome Powell downplayed expectations of a dovish turnaround, saying on Wednesday that it was premature to talk of a pause in the rate-hike cycle.
Apart of this, The Bank of England’s gloomy outlook for the UK economy they should act as a headwind for the British pound and help cap GBPUSD. It should be remembered that the British central bank foresees a recession that will last all year 2023 and the first half of 2024. On Thursday, the BoE also indicated a terminal peak lower than what is currently being quoted in the markets. This, in turn, warrants some caution on the part of aggressive bulls ahead of the release of the US NFP report.
Monthly data on employment in the US is expected. show that the economy added 200,000 new jobs in October and that the unemployment rate rose to 3.6% from 3.5% previously. US macro data releases, along with US bond yields and broader risk sentiment, will influence USD price dynamics and produce some significant opportunities around the pair. GBPUSD.
GBPUSD technical levels
Source: Fx Street
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