GBPUSD attracted some buying after a minor USD retreat from a two-month peak.
The GBPUSD pair demonstrates some resistance below the 50-day Simple Moving Average (SMA). And stages a minor rebound from sub-1.2400 levels, or more than a three-week low reached the previous day. Through the first half of the European day. Spot prices move with a moderately upward tilt, circling the 1.2425-1.2430 zone, but lack bullish conviction.
A favorable risk tone appears to be a significant element driving some profit-taking in the USD.
The risk-on drive, as shown in a further rise in global equities markets. Causes some profit-taking around the safe-haven US Dollar (USD). Which is viewed as a significant factor supporting the GBPUSD pair. However, predictions that the Federal Reserve (Fed) would keep interest rates higher for longer. As well as recent optimism about raising the US debt ceiling, may help limit the downside. As a result, traders are discouraged from putting strong bullish wagers around the major, limiting profits.
Hawkish Fed predictions and optimism over the US debt ceiling will limit USD losses ahead of Fed Chairman Powell’s speech.
Indeed, Dallas Fed President Lorie Logan stated on Thursday that the economic facts thus far do not support delaying. A rate hike at the next policy meeting in June. This follows multiple Fed officials’ recent hawkish statements. Forcing investors to reduce their bet on rate decreases later this year.
Furthermore, leading US congressional Republican Kevin McCarthy stated that discussions are doing better than last week. And that a plan to raise the government’s $31.4 trillion debt ceiling is anticipated to be debated on the House floor next week.
The British Pound (GBP), on the other hand, is still under pressure from expectations. That the Bank of England (BoE) will need to raise interest rates less often in the coming months to keep inflation under control. The bets were boosted by somewhat poor UK employment figures issued on Tuesday. And less hawkish statements by Bank of England Governor Andrew Bailey on Wednesday.
This helps to keep the GBPUSD pair under control in the lack of any market-moving economic data expected out on Friday, either from the UK or the US.
Traders may also opt to stay on the sidelines ahead of Fed Chair Jerome Powell’s address later in the US session. Which will be closely watched for hints regarding the next policy move.
This, in turn, will have a significant impact on the short-term USD price dynamics offer some major momentum to the GBPUSD pair. Nonetheless, spot prices are certain to close in the negative for the second week in a row. And the aforementioned fundamental background implies that the path of least resistance is to the downside.
