GBP/USD approaches 1.2260 hurdle ahead of BOE/Fed leaders’ comments at ECB Forum

GBP/USD pares the biggest weekly loss in over a week around 1.2200 during the mid-Asian session on Wednesday. In doing so, the cable pair cheers the upbeat UK data and the US dollar pullback amid mixed concerns. However, the market’s anxiety ahead of the week’s key data/events appears to challenge the corrective pullback from the weekly low.

The firmer prints of the UK BRC Shop Price Index for May, to 3.1% YoY versus 2.8% prior, recalled the GBP/USD buyers amid hopes of hawkish comments from the Bank of England Governor Andrew Bailey during the European Central Bank (ECB) Forum appearance. The shop prices jumped the most since 2008 per the British Retail Consortium (BRC).

The US Dollar Index (DXY) drops 0.10% to 104.39 at the latest as yields extend the previous day’s pullback from a one-week high while the US stock futures and Asia-Pacific equities trade mixed.

The greenback gauge benefited from a jump in the short-term retail inflation expectations, as well as increasingly hawkish Fedspeak, the previous day. That said, the US Conference Board (CB) Consumer Confidence Index dropped to the lowest level since February 2021, to 98.7 versus 103.20 prior. The details hint at the jump in the one-year consumer inflation rate expectations to 8% from May's revised print of 7.5%.

Given the market’s corrective pullback, as well as firmer UK data, GBP/USD may witness further recovery ahead of the ECB Forum. However, Bailey's failure to please hawks has been famous of late and can recall the sellers afterward, provided Fed Chair Powell manages to regain bull’s confidence. Other than the updates from the ECB Forum, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will also be important. Additionally, the final readings of the US Q1 GDP, which is likely to confirm a 1.5% Annualized contraction, could also help forecast the Cable pair's intraday moves.

Technical analysis

A six-week-old horizontal area surrounding 1.2155-60 restricts short-term GBP/USD downside amid steady RSI and sluggish MACD. However, the recovery moves need validation from the 10-DMA level of 1.2260 before eyeing the previous support from June 14, at 1.2305 by the press time.