- GBP/USD grinds higher at weekly top after four-day uptrend.
- Recent data, BoE talks underpin concerns of UK’s sticky inflation, suggest more rate lifts from “Old Lady”.
- Hopes of debt ceiling deal passage in US House, mixed US data prod US Dollar bulls after refreshing DXY peak.
- US ADP Employment Change, PMIs in focus for clear directions.
GBP/USD bulls stay in the driver’s seat for the fifth consecutive day, despite the Asian-session latest inaction around 1.2440 during early Thursday. In doing so, the Cable pair not only cheers the latest retreat of the US Dollar but also benefits from the hints that the UK’s inflation problem is bigger and can push the Bank of England (BoE) towards more rate hikes.
On Wednesday, Lloyds Bank unveiled monthly releases of its business sentiment gauge and inflation signals for May. On the same line, Bank of England (BoE) Monetary Policy Committee member Catherine Mann said that the gap between the headline and core inflation in the UK is more persistent than in the US and the Euro area, per Reuters.
On the other hand, the US Dollar Index (DXY) initially rose to the highest levels since March 15 before retreating from 104.70. The greenback’s latest pullback could be linked to the recently mixed US data and receding fears that the US will default on its government debt payment.
The hope of US debt ceiling passage from the House of Representatives increased after US Senate Republican Leader McConnell conveyed expectations of the US debt ceiling bill passing and reaching the Senate on Thursday.
Elsewhere, US JOLTS Job Openings rose to 10.103M in April versus 9.375M expected and 9.745M prior whereas Chicago Purchasing Managers’ Index dropped to 40.4 for May from 48.6 prior and 47.0 market forecasts.
It should be noted that the mixed comments from the Federal Reserve (Fed) officials also weighed on the US Dollar late Wednesday. That said, Federal Reserve (Fed) Governor Michelle Bowman cited recovery in the residential real estate market while also adding, “The leveling out of home prices will have implications for the Fed's fight to lower inflation,” per Reuters. Before him, Clevland Fed President Loretta Mester suggested that the Fed must go for a rate hike in June.
Furthermore, Fed Governor and vice chair nominee Philip Jefferson said that skipping a rate hike would allow the Fed "to see more data before making decisions about the extent of additional policy firming,” per Reuters. On the same line was Federal Reserve Bank of Philadelphia President Patrick Harker who also said on Wednesday that he is inclined to support a "skip" in interest rate hikes at the central bank's next meeting in June.
With this in mind, Wall Street Journal’s (WSJ) Nick Timiraos signaled that Federal Open Market Committee (FOMC) is likely to hold interest rates steady in June.
Amid these plays, Wall Street closed with minor losses and the yields were down while the US Dollar Index (DXY) ended Wednesday’s North American trading on the positive side despite the latest retreat.
Moving on, the US House of Representatives is debating the US debt ceiling extension and will vote on it at around 00:30 GMT, which will be key to watch ahead of a slew of the US employment and activity data.
Also read: US ADP Employment, ISM Manufacturing PMI Preview: First down, then up for US Dollar?
Technical analysis
Despite the GBP/USD pair’s successful recovery from the 100-DMA support of around 1.2300, the buyers need validation from the 50-DMA hurdle of near 1.2450.
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 clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.