GBP/USD climbs on falling US yields, upbeat market mood

• GBP/USD surges amid risk-on sentiment, despite hawkish Fed.
• Powell's hawkish stance and strong US data boost Dollar, yet global easing hopes support Pound.
• Fed's Mester hints at potential rate changes with further inflation decline, underscoring policy debates.
• UK construction sector remains robust; BoE's Pill comments on monetary easing timing affect GBP.

The GBP/USD recovered some ground against the US dollar on Tuesday during the mid-North American session amid a risk-on impulse and falling US Treasury bond yields. Investors seem confident that most global central banks will ease monetary policy, even though Fed Chair Jerome Powell pushed back against easing in March. At the time of writing, the pair exchanges hands at 1.2594.

Pound Sterling gains ground amid soft US Dollar

Despite staging a comeback, the Pound Sterling remains pressured after the US Federal Reserve Chair Jerome Powell's remarks suggest the Fed is in no rush to cut rates. That strong US ISM Manufacturing and Non-Manufacturing PMI posting solid data and an outstanding January Nonfarm Payrolls report sponsored a leg-up in the Greenback.

US Treasury bond yields climbed more than 20 basis points since last Friday and yesterday. Traders in the futures market estimate the Fed will ease policy 125 basis points throughout the year, less than the 168-bps estimated on January 12.

Recently, Cleveland’s Fed President Loretta Mester said she’s open to rate cuts if it´s clear that inflation is easing futher. She states that monetary policy is in good place. Mester added “If inflation appears to be stalling at a level above our goal, we would have the opportunity to maintain a restrictive stance for longer.”

Across the pond, S&P Global Construction PMI in January was solid, though it stood at recessionary territory despite exceeding estimates and December’s data.

In the meantime, the Bank of England (BoE) Chief Economist Huw Pill said “The debate has a bit shifted toward asking: 'when is the point when we will have seen enough accumulated evidence that ... we can begin to reduce the level of restriction in monetary policy in the economy and start to cut Bank Rate?”

GBP/USD Price Analysis: Technical outlook

The daily chart portrays the major trading sideways, though at the brisk of GBP/USD buyers reclaiming the 200-day moving average (DMA) at 1.2560. A daily close above the latter will expose 1.2600, followed by the 50-DMA at 1.2675. On the other hand, if sellers keep the exchange rate below 1.2600, that could pave the way to retest the 200-DMA and the 1.2527 daily low. Further downside is seen at 1.2469, the 100-DMA.