GBP/USD renews two-month high near 1.2400, UK GDP, Fed’s favorite inflation in focus

GBP/USD bulls attack the 1.2400 threshold while refreshing the highest levels in two months during early Friday. In doing so, the Cable pair cheers optimism surrounding the UK’s Trans-Atlantic trade deal amid easing fears from the banking sector. However, the cautious mood ahead of the Federal Reserve’s (Fed) preferred inflation gauge, namely the US Core Personal Consumption Expenditure (PCE) Price Index for February, prods the pair buyers of late.

UK Prime Minister Rishi Sunak hails a £1.8billion Brexit boost as Britain signed up to the giant Trans-Pacific Partnership, per The Sun. The news also mentioned, “The deal, which follows two years of talks, opens the door to free trade with 11 nations including Japan, Australia, Mexico, Malaysia and Singapore.”

On the other hand, Federal Reserve Chairman Jerome Powell joined three other Fed Officials to back further rate hikes on Thursday, citing the need to tame the inflation woes. However, mixed US data raise doubts about the Fed policymakers’ hawkish rhetoric and rather concentrated on the policymakers' rejection of banking crisis woes to weigh on the US Dollar.

"Inflation remains too high, and recent indicators reinforce my view that there is more work to do to bring inflation down to the 2% target associated with price stability," Federal Reserve Bank of Boston leader Susan Collins said in remarks to a gathering of the National Association for Business Economics per Reuters. Following her was Minneapolis Fed President Neel Kashkari who said, “We have to bring down inflation.” On the same line was Richmond Fed President Thomas Barkin saying that if inflation persists, we can react by raising rates further.

It’s worth noting that US Treasury Secretary Janet Yellen said on Thursday, “Banking system is sound, even as it has come under pressure.”

While portraying the mood, the US 10-year Treasury bond yields remain pressured near 3.55% while the two-year counterpart grinds higher around 4.12%, targeting the first weekly gain in four. Further, Wall Street closed positive for the third consecutive day whereas S&P 500 Futures also print mild gains at the latest.

Looking forward, the final reading of the UK’s fourth quarter (Q4) Gross Domestic Product (GDP) will be important to watch for the intraday move. However, major attention should be given to the headlines surrounding the inflation data from the US, as well as the central bankers’ reaction to the same.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

A sustained break of the 10-week-old horizontal resistance area, now support around 1.2285-65, joins the clear respect of a fortnight-long ascending trend line, close to 1.2320, to keep the GBP/USD pair buyers hopeful.