GBP/USD recovers intraday losses, lacks follow-through amid broad-based USD strength
|- GBP/USD reverses an intraday dip, though struggles to make it through the 1.0900 mark.
- Concerns about rising UK debt continue to undermine sterling and acts as a headwind.
- Recession fears, resurgent USD demand contributes to capping the upside for the major.
The GBP/USD pair recovers early lost ground to the 1.0765-1.0760 area and climbs to a fresh daily high during the mid-European session. Spot prices, however, struggle to capitalize on the move and remain below the 1.0900 round-figure mark.
The Bank of England's move on Wednesday to buy long-term bonds to restore stability appears to have calmed the market and acts as a tailwind for the British pound. This, in turn, assists the GBP/USD pair to attract some dip-buying, though a combination of factors continues to act as a headwind and caps any meaningful upside for spot prices.
Investors seem less confident in the UK government’s ability to manage the ballooning debt, especially after the announcement of the mini-budged last week. The massive unfunded tax cuts could stretch Britain's finances to their limits and derail the BoE's efforts to contain sky-high inflation, creating additional headwinds for the UK economy.
Apart from this, the emergence of fresh US dollar buying further contributes to keeping a lid on the GBP/USD pair, at least for the time being. Growing acceptance that the Fed will tighten its policy more aggressively to curb inflation triggers a fresh leg up in the US Treasury bond yields. This, along with the risk-off impulse, underpins the safe-haven buck.
The aforementioned factors make it prudent to wait for strong follow-through buying before positioning for a further recovery in the GBP/USD pair, from an all-time low touched earlier this week. In the absence of any major market-moving economic releases from the UK, traders on Thursday will take cues from a speech by BoE Deputy Governor David Ramsden.
Traders will further take cues from the US economic docket, featuring the release of the final Q2 GDP print and the usual Weekly Initial Jobless Claims. This, along with speeches by influential FOMC members and the US bond yields, will drive the greenback demand and contribute to producing short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.