GBP/USD drops back towards 1.2400 as US dollar grinds higher, UK PM Sunak’s US visit eyed

GBP/USD refreshes intraday low as the US Dollar picks up bids to pare the early Asian session losses heading into Wednesday’s London open. In doing so, the Cable pair prints a four-day losing streak around 1.2415 by the press time.

US Dollar Index (DXY) stretches the previous day’s corrective bounce while rising towards 104.20 at the latest, despite being indecisive on the day. In doing so, the greenback’s gauge versus six major currencies suffers from downbeat market bets on the Fed’s next move amid the pre-FOMC blackout for the policymakers. Additionally, recent chatters that the US government’s bond spree, due to the debt-ceiling deal, will trigger the banking crisis, as signaled by the Financial Times (FT), seem to prod the previous risk-on mood and underpin the US Dollar’s rebound.

Furthermore, interest rate futures show a nearly 20% probability of a June rate hike but the odds of witnessing 25 basis points (bps) worth rate hike in July increased of late, which in turn seems to favor the Pound Sterling sellers. The reason could be linked to downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout.

On the other hand, the cautious mood ahead of the UK Prime Minister Rishi Sunak’s US visit and fears that the British economy will have to bear the burden of too high inflation and less productivity increase weigh on the GBP/USD prices.

“British Prime Minister Rishi Sunak will advocate for a deepening of economic ties between the United Kingdom and the United States when he speaks to the country's lawmakers and business representatives during his trip to Washington D.C. this week,” Reuters quotes a British Government press release.

While portraying the market’s mood, the 10-year coupons remain sluggish at around 3.67%, despite a recent corrective bounce, whereas the two-year counterpart rose a bit to 4.50% at the latest. While portraying the mood, S&P500 Futures print mild gains by tracking Wall Street’s performance.

Moving forward, the UK-US political headlines may entertain GBP/USD traders, in addition to the chatters about the Bank of England (BoE) and the Federal Reserve’s (Fed) next moves.

Technical analysis

A two-week-old ascending support line joins the steady RSI (14) line and the receding bearish bias of the MACD signals to challenge the GBP/USD bears around the 1.2400 round figure.

Also read: GBP/USD Price Analysis: Cable prods three-day downtrend above 1.2400, further rise appears difficult