GBP/USD eases from daily high post-UK GDP, holds above 1.2100 mark amid weaker USD

The GBP/USD pair attracts some buying on Thursday and reverses a major part of the previous day's slide to a nearly three-week low. The pair sticks to its intraday gains above the 1.2100 mark, though retreats a few pips in reaction to the weaker-than-expected UK macro data.

According to the final version of the Q3 GDP print released by the Office for National Statistics, the UK economy contracted by 0.3% during the July-September period. This is slightly below the 0.2% decline estimated initially and was accompanied by a downward revision of the yearly growth rate to 1.9% from 2.4%. This adds to a bleak outlook for the UK economy and acts as a headwind for the British Pound, though a weaker US Dollar continues to lend support to the GBP/USD pair.

The upbeat mood - as depicted by a generally positive tone around the equity markets - is seen as a key factor undermining the safe-haven greenback. Apart from this, softer US Treasury bond yields further contribute to keeping the USD bulls on the defensive. Despite the Fed's hawkish outlook, investors expect the US central bank to pivot to something more neutral. This, in turn, drags the yield on the 10-year US government bond away from the monthly peak touched on Wednesday.

That said, a dovish outcome from the Bank of England (BoE) meeting last week could hold back traders from placing aggressive bullish bets around the GBP/USD pair. It is worth recalling that two out of nine BoE MPC members voted to keep interest rates unchanged, suggesting that the central bank is closer to ending the current policy tightening cycle. This makes it prudent to wait for strong follow-through buying before positioning for any further gains amid looming recession risks.

Market participants now look forward to the US economic docket, featuring the releases of the final Q3 GDP print and the usual Weekly Initial Jobless Claims data. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the GBP/USD pair. The focus, however, remains on the US Core PCE Price Index (the Fed's preferred inflation gauge), due on Friday, which will play a key role in driving the USD during the year-end holiday season.

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