GBP/USD bounces from weekly lows and marches firmly above 1.2530s pre-FOMC minutes
|- Cable put a lid on Tuesday’s losses and recovers some ground, gaining 0.42% in the week.
- A positive market sentiment boosts the prospects for GBP, despite a strong US Dollar.
- GBP/USD Price Forecast: A break above 1.2700 could lead to 1.3000.
- Further downward pressure might enter the market if the major trades below 1.2470.
The British pound recovers some ground on Wednesday during the North American session, bouncing near weekly lows around 1.2480s and back above the 1.2500 figure. At 1.2545, the GBP/USD grinds higher due to an improved market mood.
Market sentiment boosts GBP's prospects
Invertors’ shrugged off Federal Reserve concerns that aggressive tightening might cause a recession. On Tuesday, Atlanta’s Fed President Raphael Bostic, who leans towards the hawkish end of the spectrum, sounded dovish, saying that the US central bank might pause its tightening cycle once rates hit the 2% threshold so the central bank can witness how the economy behaves.
Meanwhile, global equities pare some of their weekly losses, reflecting the upbeat move while the greenback rises. The US Dollar Index, a measurement of the buck’s value against a basket of six currencies, reclaims the 102.000 mark, gaining 0.40%, putting a lid on the GBP/USD rally. The US 10-year Treasury yield remains flat around the 2.752% mark.
The US economic docket featured housing data, which came in mixed but tilted positively, despite concerns about the US's growing economic outlook. Later, April’s Durable Goods Orders grew at a slower pace than foreseen but kept positive. At around 18:00 GMT, the Federal Reserve will unveil its May minutes, giving traders additional clues regarding the US central bank monetary policy plans.
In the meantime, the Atlanta Fed GDP Now, the projection of US GDP for the second quarter, rose to 1.8%, lower than the previous reading, which came in at 2.1%.
An absent UK docket leaves GBP/USD traders adrift to BoE-speak led by its Chief Economist Huw Pill. Earlier, Pill said that too much tightening runs the risk of getting stuck in a deep recession, but too little tightening runs the risk of inflation gaining self-sustaining momentum. Pill's remarks came a day after a raft of downbeat UK PMI data, which reignited fears about a UK economic slowdown, threatening to keep the central bank from further tightening monetary conditions.
GBP/USD Price Forecast: Technical outlook
The GBP/USD is downward biased, albeit recovering some ground. Nevertheless, a solid resistance area looms at the May 4 daily highs near 1.2638, a resistance just shy of a four-month-old downsloping trendline that passes above 1.2700. That ceiling area would be difficult to overcome for GBP/USD bulls, but once cleared, a re-test of the 1.3000 area is on the cards. Otherwise, a break below 1.2470 would expose the major to further selling pressure that could send the pair for a re-test of the YTD lows at around 1.2155.
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