GBP/USD gains ground on US Dollar weakness

Cable trades with gains near the 1.2350 area and benefits from the positive market mood fueled by the announcement on Sunday regarding an agreement on the debt ceiling between US President Joe Biden and Republican House Speaker Kevin McCarthy. While neither country will release relevant economic reports the pace of the session will be dictated by the market assessment of the mentioned agreement.

US stock futures rise signaling a positive market mood

On Sunday, Joe Biden and Kevin McCarthy made a joint announcement, stating that they have reached an agreement regarding the extension of the debt ceiling. According to the proposed deal, the government would be allowed to borrow money without increasing the limit, which would be temporarily suspended until 2025. However, the proposal still requires approval from Congress, although US officials are hopeful that it will be passed. 

The news of the agreement was well-received by Wall Street futures, leading to a rise in their value and exerting downward pressure on the US Dollar.

For the rest of the week, the focus will shift to Nonfarm Payrolls (NFP) data from the US from May which is expected to hint at more pain in the American labor market. In that sense the outlook may have an impact on expectations from the next Federal Reserve (Fed) meeting in June and hence on the US Dollar price dynamics.

Levels to watch

Technically speaking, the GBP/USD holds a neutral to bearish outlook for the short term. The bears are struggling to maintain their dominance, but technical indicators are still unfavorable, suggesting that the market may still have some downside potential.

The psychological mark at 1.2320 is the immediate support level for GBP/USD. A break below this level could pave the way towards the 100-day Simple Moving Average (SMA) at 1.2290 area and then to the 1.2250 zone. Furthermore, a move above the 1.2390 level would favor the bull’s momentum with next resistances at the 1.2450 zone and 20-day SMA at 1.2480.