GBP/USD oscillates near one-month high below 1.2200, BOE, US NFP in focus

• GBP/USD bulls take a breather at multi-day top as the key week begins.
• Sunak unveils plan to cut income tax in long-term, Truss gets UK Chancellor Zahawi’s formal endorsement as PM.
• Recession fears, Fed’s Powell weighed on the USD even as inflation data came in firmer.
• PMIs can entertain traders ahead of BOE, US jobs report for Thursday.

GBP/USD prices grind higher as it begins the key week comprising the Bank of England (BOE) monetary policy meeting and the US employment data for July. That said, the cable pair rose during the last two consecutive weeks amid a softer US dollar, as well as political optimism in the UK.

Recently, ex-UK Chancellor Rishi Sunak vows a 20% income tax cut by 2029 in a bid to become the next British Prime Minister. However, Reuters showed the latest results of the YouGov poll that showed Foreign Minister Liz Truss held a 24-point lead over Sunak among Conservative Party members. It’s worth noting that the UK Telegraph came out with the news suggesting current Chancellor Nadhim Zahawi formally endorse Liz Truss to be the next Conservative Party Leader. Given that both contestants have sound plans and no major political negative, except for Truss’ strong Brexit support, the cable cheers the hopes of better days after multiple political hiccups in the past.

Elsewhere, the US Dollar Index (DXY) marked the second consecutive weekly fall after the US Federal Reserve (Fed) Chairman Jerome Powell highlighted data-dependency and neutral rates. Also drowning the greenback was the “technical recession” in the US after the Annualized readings of the US Q2 Gross Domestic Product (GDP) dropped for the second straight quarter.

Even so, comments from the uber dove Minneapolis Fed President Neil Kashkari and the Fed’s preferred inflation gauge appeared to have probed the greenback bears of late. “The fed is still a long way away from backing off rate hikes,” said Fed’s Kashkari to the New York Times (NYT). The policymaker added, “Hiking rates by half a point at coming Fed meetings seems reasonable to me.” Furthermore, the US Core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose to 4.8% YoY for June versus 4.7% prior.

It should be noted that the easing fears of the tighter rate hikes joined mixed US data to help Wall Street witness another positive week while the US Treasury yields closed on a softer side by the end of Friday.

On a different page, the US-China tussles escalate as Beijing warns the White House over US House Speaker Nancy Pelosi’s plan to visit Taiwan. Also, US President Joe Biden got a covid infection and offer an additional burden for the risk appetite.

Looking forward, multiple PMIs to entertain the GBP/USD traders ahead of the BOE’s “Super Thursday” and Friday’s US Nonfarm Payrolls (NFP). Given the recently firmer sentiment and the market’s move against the US dollar, hawkish BOE could have a more positive impact on the Cable pair than previously. That said, the “Old Lady” is expected to announce a 0.25% rate hike but the market does anticipate a stronger move.

Also read: GBP/USD Weekly Forecast: Bulls on the lookout for 1.2500 ahead of BOE, NFP

Technical analysis

Despite breaking the 14-week-old resistance line, which now support around 1.2075, GBP/USD buyers need validation from the 50-DMA hurdle of 1.2210 to keep reins. That said, RSI (14) and MACD are both in favor of the upside momentum of late.