GBP/USD grinds higher towards 1.2155 on hopes of easy Fed rate hikes, focus on US PCE Inflation
|- GBP/USD stays firmer around weekly high after the biggest monthly jump since July 2020 in November.
- US Dollar remains depressed as Fed’s Powell, US Treasury Secretary Yellen favor hopes of easy rate hikes.
- Optimism surrounding China, softer US data adds strength to the Cable’s upside momentum.
- Easing UK inflation expectations contrast with the US numbers but traders stay focused on top-tier signals, data.
GBP/USD seesaws around the weekly top as the Cable pair buyers cheer broad-based US Dollar weakness during early Thursday. In doing so, the quote pokes the 1.2100 threshold during the two-day uptrend ahead of the key UK/US data.
US Federal Reserve Chairman Jerome Powell’s first public appearance after November’s Federal Open Market Committee (FOMC) meeting turned out as dovish for the US Dollar as the policymaker stated that it makes sense to moderate the pace of interest rate increases. Fed’s Powell also suggested that the time to slow the pace of rate hikes could come as soon as the next meeting in December. On the same line were the latest comments from US Treasury Secretary Janet Yellen who teased a soft landing and pushed back the need for aggressive rate lifts.
Furthermore, the easing in the virus-led activity controls in China, as the dragon nation reports the third day of declining daily infections after refreshing the record top, also seemed to have weighed on the US Dollar due to its safe-haven status. Recently, Global Times mentioned that China is speeding up to cast aside large-scale lockdowns.
It’s worth noting that the latest increase in the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, should have also probed the GBP/USD bulls, but did not. Additionally acting as an upside barrier for the Cable pair could be the latest monthly survey data from Citi/YouGov suggesting less pressure on the Bank of England to raise rates. “The British public's expectations for inflation over the coming years eased back further in November from record highs reached in August,” said the survey reports per Reuters.
Against this backdrop, S&P 500 Futures print mild gains and the equities in the Asia-Pacific region tracked Wall Street’s upbeat performance. Further, the US 10-year Treasury bond yields remain pressured around 3.62% after refreshing a two-month low the previous day.
Looking forward, the final readings of the UK’s November month S&P Global/CIPS Manufacturing PMI, expected to confirm 46.2 initial forecasts, could offer immediate directions. However, major attention will be given to Fed’s preferred inflation gauge, namely US Core Personal Consumption Expenditure (PCE) Price Index for October, expected 5.0% YoY versus 5.1% prior. Additionally important will be the monthly prints of the US ISM Manufacturing PMI for November, expected 49.8 versus 50.2 prior.
Technical analysis
A clear upside break of the one-week-old descending trend line, now support near 1.2070, directs GBP/USD buyers towards the monthly high near 1.2155.
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