GBP/USD rebound battles 1.2530 hurdle on broad USD pullback, BOE-Fed duet eyed

GBPUSD tracks other major currencies while printing mild gains versus the US dollar during early Tuesday morning in Europe. Even so, the cautious mood ahead of the key central bank meeting and holidays in China and Japan challenges the cable buyers around nearby hurdle surrounding 1.2530 at the latest.

The US Dollar Index (DXY) drops 0.13% to 103.47 as an off in Japan resulting in inaction in the Asian bond market, which in turn leaves the benchmark Treasury yields unchanged. Given the US 10-year Treasury yields’ pullback from the highest level since late 2018 by the end of Monday, after refreshing the multi-day high, USD traders took the dormant bond market as an opportunity to pare recent gains.

Also likely to have weighed on the DXY prices could be the recently easy US data. The US ISM Manufacturing PMI for April eased to 55.4 versus 57.6 market forecast and 57.1 prior readings while S&P Manufacturing PMI also softened to 59.2 from 59.7 expected and prior.

Even so, hopes of a 0.5% rate hike from the Fed and economic challenges for the UK policymakers, including those emanating from Brexit and the Russia-Ukraine crisis, keep GBP/USD sellers hopeful.

Brexit has always been a pain for the UK policymakers and the latest deadlock resulted in Brit expats’ inability to drive vehicles in Spain. “British migrants living in Spain are facing driving bans after the Government failed to reach a post-Brexit deal on licences,” said Metro news.

Elsewhere, Germany steps back from the previous agitation to ban Russian oil imports, which in turn fuels the geopolitical tension surrounding Kyiv and underpins the US dollar’s safe-haven demand. Also favoring the rush for risk safety are the stricter activity lockdowns in Beijing due to covid resurgence.

That being said, GBP/USD recovery remains doubtful until the Fed-BOE duet completes. For the day, the US Factory Orders for March, expected at 1.1% versus -0.5% prior, will decorate the calendar.

Technical analysis

Although RSI conditions hint at an extended recovery move towards the 10-DMA level of 1.2685, a daily closing beyond 1.2530 becomes necessary for short-term buyers to keep reins. Even so, the previous support line from December 2021, near 1.2910 by the press time, acts as the key hurdle to the north.

On the contrary, the recently flashed multi-day bottom around 1.2410 appears a tough nut to crack for the GBPUSD bears.