GBP/USD holds steady above 1.2600, bulls seem non-committed despite softer USD

The GBP/USD pair struggles to capitalize on the previous day's goodish bounce of around 50 pips from the 1.2570 region and oscillates in a narrow band during the Asian session on Friday. Spot prices currently trade near the top end of the weekly range, around the 1.2620 area, and draw support from a modest US Dollar (USD) downtick.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, extends its sideways consolidative price move as traders seek more clarity about the timing and the pace of interest rate cuts by the Federal Reserve (Fed). Apart from this, the underlying bullish tone across the global equity markets further undermines the safe-haven Greenback and acts as a tailwind for the GBP/USD pair, though the lack of follow-through buying warrants caution before positioning for further gains.

The rising prospect of the Bank of England (BoE) reducing interest rates in 2024 is holding back traders from placing aggressive bullish bets around the British Pound (GBP). In fact, BoE Governor Andrew Bailey noted last week that things are heading in the right direction and that the current level of bank interest rate remains appropriate. Adding to this, BoE's chief economist Huw Pill said earlier this week that the interest rate could drop this year as a reward to the economy for bringing down inflation.

Traders might also prefer to wait on the sidelines ahead of next week's important macro releases, starting with the UK jobs data and the latest US consumer inflation figures on Tuesday. This will be followed by the UK CPI, the prelim fourth quarter GDP print and monthly Retail Sales figures on Wednesday, Thursday, and Friday respectively. Nevertheless, the mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before placing fresh bullish bets.

Technical levels to watch