GBP/USD snaps three-day winning streak below 1.2400 as risk aversion joins mixed UK/US statistics

GBP/USD clings to mild losses as it extends the early Asian session pullback from a one-week high while snapping a three-day uptrend near 1.2390 heading into Wednesday’s London open.

That said, the Cable pair’s latest gains could be linked to the US Dollar’s broad recovery, as well as downbeat concerns about the UK fundamentals and hawkish Federal Reserve (Fed) bets. Furthermore, fears of looming US default and mixed US data also allow the Pound Sterling bears to keep the reins.

Earlier in the day, Lloyds Bank unveiled monthly releases of its business sentiment gauge and inflation signals for May. “The Lloyds Bank Business Barometer fell to 28% in May from 33% in April, its first decline since February, but in line with the survey's long-term average,” said Reuters. The news also quotes Hann-Ju Ho, senior economist at Lloyds Bank as saying that the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures.

On the other hand, the US Dollar Index (DXY) picks up bids to around 104.25, after snapping a six-day uptrend near the highest levels in 10 weeks. While tracing the US Dollar’s latest gains, the market’s fears emanating from downbeat China activity data for May and looming US default gain major attention. Also weighing on the sentiment, as well as on the GBP/USD price, could be the anxiety ahead of the key data/events as the US Republicans show readiness to vote down the agreement to avoid the debt-ceiling expiration.

It’s worth mentioning that the market’s comparatively more hawkish bias about the Federal Reserve (Fed) than the Bank of England (BoE) also weighs on the Pound Sterling pair even as the US data has been mixed of late. On Tuesday, the US Conference Board's (CB) Consumer Confidence Index edged lower to 102.30 for May from an upwardly revised 103.70 prior marked in April (from 101.30). Additional details of the survey report mentioned that the one-year consumer inflation expectations ticked down to 6.1% in May from 6.2% in April. Further, the Dallas Fed Manufacturing Business Index for May dropped to -29.1 from -23.4 and versus -19.6 market expectations.

Looking forward, the market’s cautious mood, as portrayed by the mildly offered S&P500 Futures and the US Treasury bond yields, may keep the GBP/USD bears hopeful ahead of the US House of Representatives voting on the debt ceiling agreement. Also important to watch is the Fed’s Beige Book and the US JOLTS Job Openings for April, expected 9.375M versus 9.59M prior, as well as the Chicago Purchasing Managers' Index for May, likely to fall to 47.0 from 48.6.

Technical analysis

GBP/USD pair’s failure to cross the 200-DMA hurdle, around 1.2445 by the press time, keeps the Cable bears hopeful of retesting the monthly low surrounding 1.2300.