- GBP/USD attracts some dip-buying and remains closer to over a two-month high set on Friday.
- The USD pares intraday gains in reaction to softer inflation data and lends support to the pair.
- The fundamental backdrop favours bulls and supports prospects for a further appreciating move.
The GBP/USD pair reverses a dip to the 1.2355-1.2350 region and trades in the neutral territory during the early North American session on Friday. The pair, however, remains below over a two-month high touched this Friday and is currently placed around the 1.2380-1.2385 zone, nearly unchanged for the day.
The US Dollar (USD) trims a part of its intraday gains following the release of the Personal Consumption Expenditures (PCE) Price Index and turns out to be a key factor that assists the GBP/USD pair to attract fresh buyers at lower levels. In fact, the US Bureau of Economic Analysis reported that the headline PCE Price Index decelerated to a 5% YoY rate in February - the slowest pace of rise since September 2021. Adding to this, the Fed's favourite inflation indicator - Core PCE Deflator - edged down to 4.7% during the reported month against consensus estimates pointing to a steady reading of 4.7%.
The data fuels speculations that the Federal Reserve might soon pause the rate-hiking cycle in the wake of the turmoil in the banking sector, which is evident from a fresh leg down in the US Treasury bond yields. This, along with the prevalent risk-on mood, acts as a headwind for the safe-haven Greenback and lends support to the GBP/USD pair. The British Pound is further underpinned by the prospects for additional interest rate hikes by the Bank of England (BoE). The bets were reaffirmed by the UK GDP print, which showed that the economy expanded by 0.1% during the fourth quarter.
The fundamental backdrop favours bullish traders and suggests that the path of least resistance for the GBP/USD pair is to the upside. Hence, any meaningful pullback might still be seen as a buying opportunity and is more likely to remain limited, at least for the time being. Nevertheless, spot prices remain on track to register strong weekly gains and end in the green for the sixth successive week.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0950 ahead of EU/ US inflation data

EUR/USD is dropping below 1.0950, coming under fresh selling pressure amid an uptick in the US Dollar on Thursday. Softer-than-expected French, German and Spanish inflation data weigh on the Euro. All eyes are on the Eurozone and US inflation data for fresh impetus.
GBP/USD holds lower ground below 1.2700, US PCE data looms

GBP/USD is finding fresh sellers below 1.2700 in European trading hours on Thursday. The US Dollar recovery is exerting downward pressure on the pair, as markets trade with cautious ahead of the US PCE inflation data, BoE- and Fed-speak.
Gold price remains supported by dovish Fed expectations; eyes US PCE for fresh impetus

Gold price (XAU/USD) extends its sideways price move heading into the European session on Thursday and remains confined in a narrow trading band below its highest level since May 5 touched the previous day.
Bitcoin Spot ETF anticipation fuels BTC price rally in spot and futures markets

Bitcoin Spot ETFs could see a batch approval in January. Eric Balchunas, a Bloomberg ETF analyst shared details of an updated application by asset manager BlackRock.
Inflation misses embolden dovish bets

A wave of inflation misses around the globe has helped to embolden doves, with the market continuing to price in peak rates and a move from central banks towards more investor friendly monetary policy into 2024.