GBPUSD rises during the Asian session on Wednesday, but there is no follow-through.
The GBPUSD pair rises in the Asian session on Wednesday. Looking to build on the previous day’s recovery from the 1.2685 level. Spot prices are currently flirting with the 50-day SMA. Slightly above the mid-1.2700s, and are supported by a mildly weaker tone around the US Dollar (USD).
A slight decline in the value of the US dollar provides support, but the weakening UK economic outlook limits the upside.
In fact, the USD Index (DXY). Which measures the value of the US dollar against a basket of currencies, has fallen further from a one-month high reached on Tuesday. Philadelphia Federal Reserve’s overnight dovish remarks. When Reserve Bank President Patrick Harker announces. That the policy rate would most likely be reduced sometime next year.US Treasury bond yields fall slightly, undermining the buck. However, rising consensus that the US Federal Reserve would hold interest rates higher for longer in the aftermath of an incredibly strong economy could help limit further USD losses.
The carefully anticipated US monthly jobs data released last Friday boosted expectations. By pointing to sustained tightness in the labor market. And raising the probability of a soft landing for the economy. Furthermore, Fed Governor Michele Bowman stated on Monday. That additional interest rate increases are likely to be required to bring inflation down to the central bank’s 2% target. This, combined with a milder risk tone. Raises the chance of some buying around the safe-haven buck. Which might limit gains for the GBPUSD pair. Against the backdrop of a grim outlook for the UK economy.
Traders appear cautious ahead of the US CPI and UK macro data releases on Thursday and Friday.
Indeed, according to the National Institute of Economic and Social Research (NIESR). There is a 60% chance that the administration will go to the polls during a recession. The NIESR said in its quarterly analysis. That it will take until the third quarter of 2024 for UK output to return to pre-pandemic levels. This comes as the British Retail Consortium reported on Tuesday. That UK Retail Sales in July experienced the worst year-on-year rise since August 2022. Furthermore, the Bank of The Bank of England’s (BoE) less hawkish forward guidance should help to keep the GBPUSD pair under control.
It is worth recalling that the Bank of England hiked its key benchmark interest rate by 25 basis points. To a 15-year high of 5.25% on Thursday. Signaling that the tightening cycle may be coming to an end. The Bank of England described its present monetary policy. As “restrictive,” forcing investors to reduce their forecasts for the peak rate. As a result, aggressive bullish traders should exercise care before preparing for any further appreciation in the GBPUSD pair.
Traders may also want to stay on the sidelines. Ahead of this week’s significant macroeconomic data from the United States and the United Kingdom.
The most recent consumer inflation numbers for the United States are due. on Thursday, which will have a significant impact on market expectations about the Fed’s future rate-hike path and drive USD demand in the short term. This will be followed by the UK macro data dump, including the Prelim GDP report on Friday, which will assist define the next leg of the GBPUSD pair’s directional move.
