- GBP/USD turns positive for the third straight day and climbs to a two-week high on Friday.
- The USD trims a part of its intraday gains and turns out to be a key factor lending support.
- Bets for a 25 Fed rate hike in May, the risk-off impulse underpins the buck and cap gains.
The GBP/USD pair attracts fresh buying following an intraday dip to the 1.2445 region and build on its steady intraday ascent through the early North American session. The uptick, marking the third successive day of a positive move, pushing spot prices to a two-week high, around the 1.2515-1.2520 region in the last hour – though it lacks bullish conviction.
The US Dollar (USD) retreats from a two-and-half-week-high touched this Friday in reaction to the softer US macro data, which, in turn, is seen lending some support to the GBP/USD pair. In fact, the US Bureau of Economic Analysis reported that the US Personal Consumption Expenditures (PCE) Price Index declined more-than-expected, to 4.2% on a yearly basis in March from 5.1% previous. The Core PCE Price Index (the Fed's preferred inflation gauge), meanwhile, edged lower to 4.6% from 4.7%.
Apart from this, a steep intraday decline in the US Treasury bond yields contributes to keeping a lid on the USD and acts as a tailwind for the GBP/USD pair amid rising bets for another 25 bps rate hike by the Bank of England (BoE) in May. The markets, however, still seem convinced that the Federal Reserve (Fed) will go ahead with a 25 bps lift-off next week. This, along with the prevalent cautious market mood, continues to underpin the safe-haven buck and might cap the upside for the major.
The aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before placing fresh bullish bets around the GBP/USD pair and positioning for any further near-term appreciating move. Nevertheless, spot prices remain on track to register gains for the second successive week as the market focus now shifts to the key central bank event risk - the highly-anticipated FOMC policy meeting starting next Tuesday.
Technical levels to watch
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