GBPUSD has entered a positive consolidation phase and is trading slightly below its 15-month high.
During the Asian session on Friday. The GBPUSD pair oscillates in a narrow trading zone. Consolidating its recent substantial advances over the last two weeks or so. Reaching its highest level since April 2022. Spot prices are now trading in the 1.3130-1.3125 range. And the fundamental background continues to favor bullish traders.
Bets that the Fed will soon halt its rate-hiking cycle underpin and support the USD.
The US Dollar (USD) is under pressure for the seventh consecutive day. Hitting a new 15-month low in response to firming global economic data. The Federal Reserve (Fed) is expected to have completed its policy tightening cycle. The British Pound (GBP) continues to benefit from increased expectations. That the Bank of England (BoE) would need to hike interest rates further to tackle excessive inflation. This should operate as a tailwind for the GBPUSD pair. Supporting possibilities for an extension of the well-established near-term uptrend.
Investors are sure that the US Federal Reserve will keep interest rates unchanged for the remainder of the year following the widely anticipated 25 basis point increase in July. The US CPI report on Wednesday, which indicated further deceleration in consumer prices, increased the bets. Furthermore, the US Producer Price Index (PPI) noted the In June, the yearly increase was the lowest in nearly three years. This follows signals that the US labor market is cooling, which should allow the Fed to temper its aggressive position, keeping USD bulls on the defensive.
Expectations of future policy tightening by the Bank of England also help to limit the fall.
In contrast, current market pricing suggests that the Bank of England might hike interest rates from 5% to a cycle high of 6.5% to reduce demand and drive inflation lower. The speculation was fanned by better UK wage growth statistics, which, according to BoE Governor Andrew Bailey and UK Finance Minister Jeremy Hunt, is undermining inflationary measures. This, to a greater extent, serves to mitigate the danger of a UK recession later this year and shows that the route The path of least resistance for the GBPUSD pair stays upward.
The UK does not have any market-moving economic data scheduled on Friday, putting the major at the mercy of USD price dynamics. Traders will draw cues from the publication of the Preliminary Michigan US Consumer Sentiment Index later in the early North American session. This, combined with wider risk sentiment, may affect the USD and offer some momentum to the GBPUSD pair on the week’s last trading day. Nonetheless, spot prices are on track to post robust gains and close the week in the green for the second week in a row.
