GBP/USD bulls cheer US Dollar weakness, Fed hawks’ retreat above 1.2400

GBP/USD remains firmer around 1.2420 during early Tuesday in Asia as bulls approach the multi-day-old resistance area amid broad US Dollar weakness. In doing so, the Cable pair ignores downbeat inflation forecasts and Brexit concerns at home amid optimistic comments from the Bank of England (BoE) Officials.

That said, the US Dollar Index (DXY) dropped the most in a fortnight the previous day to test the lowest levels in two months as downbeat US data and yields weigh on the Federal Reserve (Fed) bets.

On Monday, US ISM Manufacturing PMI dropped to the lowest levels since May 2020 in March, to 46.3 versus 47.5 expected and 47.7 prior. On the same line, the final readings of March’s S&P Global Manufacturing PMI eased to 49.2 compared to 49.3 initial estimations.

Softer US PMIs joined the market’s lack of fears from the OPEC+ supply cuts and the resulting Oil price run-up to weigh on the yields. That said, the US 10-year Treasury bond yields printed a four-day downtrend to 3.41% at the latest.

With this, the CME’s FedWatch Tool marked nearly 43% market bets on the Fed’s 0.25% rate hike in May, versus 52% expected on Friday.

At home, Bank of England (BoE) Chief Economist Huw Pill crossed wires via Reuters while saying, “The UK banking system is well capitalized.” The policymaker also said that the Well-capitalized banks help combat inflation, though inflation is still far too high.

Further, the latest monthly survey from Citi and YouGov, published on Monday, said the UK public's inflation expectations eased in March after edging a tad higher in February. ‘For 12 months ahead, the UK public inflation expectations eased to 5.4% in March from 5.6% in February,” states the survey details.

It should be noted that No10’s confirmation that the traffic jam at Dover port was due to Brexit and political chaos around grooming gangs prod the GBP/USD buyers.

Amid these plays, Wall Street closed mixed while the riskier assets cheered the US Dollar’s weakness.

Moving on, a light calendar may allow the Cable pair to remain firmer for the day. However, Wednesday’s US ADP Employment Change, ISM Services PMI and Friday’s US Nonfarm Payrolls (NFP) are the keys for the GBP/USD pair traders to watch for clear directions.

Technical analysis

GBP/USD approaches the 1.2445-50 key resistance area comprising multiple tops marked since early December 2022. It’s worth noting that the RSI (14) conditions are firmer this time, suggesting brighter chances of the quote’s run-up beyond the critical upside hurdle. Meanwhile, the Cable sellers need validation from February’s high of 1.2270.