GBP/USD dwindles near the 1.2500 figure after US economic data
|- The British pound clings to weekly gains of 0.24%, ahead of next week’s key events.
- Sentiment remains dismal, a headwind for the GBP/USD.
- GBP/USD Price Forecast: Buyers’ failure to recapture 1.2600 might open the door for selling pressure.
The British pound is sliding for the second consecutive day, after reaching a daily high near 1.2560, retreated and eyes for a re-test of the 1.2500 figure. At 1.2509, the GBP/USD falls courtesy of a dismal market mood, influenced by the ECB, which is preparing to lift off rates, although it would be done “gradually,” as ECB’s President Mrs. Lagarde acknowledged.
Sentiment, high US Treasury yields, and a strong USD weigh on the GBP/USD
Also, a risk-off mood keeps high-beta currencies, like the GBP, pressured. In the FX space, safe-haven peers led by the greenback rise, despite a higher reading in unemployment claims. The Initial Jobless Claims for the week ending on June 4 increased by 229K, worse than the 210K foreseen. The report shows that while the labor market remains tight, data indicates that there has been an uptick in layoffs.
Despite being a negative report, the buck remains in the driver’s seat, boosted by higher US Treasury yields. The 10-year US Treasury yield is rising two and a half basis points, at 3.051%, underpinning the greenback. The US Dollar Index, a measure of the US Dollar value vs. a basket of six currencies, advances close to 0.50% and is back above the 103.000 mark, which was last reached on May 23.
Aside from this, UK Prime Minister Boris Johnson said that its the time to cut taxes in the UK while announcing a house-buying scheme, aiming to give people an opportunity to buy a house.
In the week ahead, the US Consumer Price Index (CPI) May report looms. The headline figure expectation on an annual basis is 8.3%. The so-called core CPI, which excludes food and energy, is foreseen at 5.9% YoY. Additionally, the University of Michigan Consumer Sentiment report will shed some light on how households feel about the US economy, alongside inflation expectations for five years.
GBP/USD Price Forecast: Technical outlook
The GBP/USD daily chart depicts the pair remains downward pressured, though consolidating in a wide 1.2450-1.2600 range. The daily moving averages (DMAs) stay above the exchange rate and accelerate downwards. It’s worth noting that the Relative Strength Index (RSI), pushed to positive territory, though of late, is back below the 50 mid-line, which exacerbated the GBP/USD fall in the last two days.
Hence, the GBP/USD bias favors sellers. The GBP/USD first support would be the 1.2500 figure. A breach of the latter will send the pair towards challenging the June 7 swing low at 1.2430. Once cleared, the next demand level would be May 17, 1.2313 daily low, followed by the YTD Low at 1.2155.
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