- GBP/USD oscillates in a narrow trading band near its highest level since May 11.
- Bets for an imminent Fed rate hike pause weigh on the USD and act as a tailwind.
- Expectations for more rate hikes by the BoE lend additional support to the major.
The GBP/USD pair is seen consolidating the overnight blowout rally to its highest level since May 11 and oscillating in a narrow trading band, just above mid-1.2500s during the Asian session on Friday.
The US Dollar (USD) languishes near a two-week low and continues to be weighed down by the disappointing release of the US Initial Jobless Claims, which in turn, acts as a tailwind for the GBP/USD pair. The US Department of Labor (DOL) reported on Thursday that the number of Americans filing new claims for unemployment benefits rose more than anticipated, to the highest level in more than 1-1/2 years last week. This, in turn, reinforced market expectations that the Federal Reserve (Fed) will pause rate hikes after a two-day policy meeting on June 13-14. This led to the overnight slide in the US Treasury bond yields and undermines the Greenback.
Adding to this, a slight improvement in the global risk sentiment further weighs on the safe-haven buck and offers additional support to the GBP/USD pair. That said, worries about a global economic slowdown might keep a lid on any optimism in the markets. In fact, the Organization for Economic Co-operation and Development (OECD) forecasts that the global economy is set for a weak recovery over the coming years as persistent core inflation and tighter monetary policy weigh on demand. OECD now expects the global economy to expand by 2.7% this year - the lowest annual rate of growth since the 2008-2009 financial crisis excluding the pandemic-hit year of 2020.
Furthermore, expectations that the Fed will hike rates again in July helps limit the downside for the Greenback and holds back traders from placing aggressive bullish bets around the GBP/USD pair. Despite last week's dovish rhetoric by several Fed officials, surprise rate hikes by the Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) this week suggest that the fight against inflation is still not over. This supports prospects for further tightening by the Fed. The downside for the major, however, remains cushioned on the back of expectations that the Bank of England (BoE) will be far more aggressive in policy tightening to contain stubbornly high inflation.
Traders, meanwhile, might prefer to move to the sidelines ahead of the latest US consumer inflation figures and the key central bank event risk - the highly anticipated FOMC monetary policy meeting - next week. In the meantime, the GBP/USD pair remains at the mercy of the USD price dynamics in the absence of any relevant market-moving economic releases - either from the UK or the US. Nevertheless, spot prices remain on track to register gains for the second successive week.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays near 1.0800 after upbeat US data
EUR/USD stays under modest bearish pressure and trades near 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.