- GBP/USD once again finds support near the 200-day SMA and regains positive traction on Friday.
- Retreating US bond yields prompts some selling around the USD, which is seen as lending support.
- Rising bets for additional rate hikes by the BoE and the Fed warrant caution for aggressive traders.
The GBP/USD pair attracts fresh buyers in the vicinity of a technically significant 200-day Simple Moving Average (SMA) and reverses a part of the overnight losses back closer to the weekly low. The pair sticks to its intraday gains and is currently placed near the top end of the daily range, just a few pips below the 1.2000 psychological mark.
A modest pullback in the US Treasury bond yields prompts some selling around the US Dollar, which, in turn, is seen as a key factor pushing the GBP/USD pair higher. The British Pound draws additional support from rising bets for additional rate hikes by the Bank of England (BoE). It is worth recalling that the BoE Governor Andrew Bailey said on Wednesday that some further increase in bank rates may turn out to be appropriate, though added that nothing is decided. This was followed by hawkish remarks by the BoE Chief Economist Huw Pill on Thursday, noting that Britain's economy is showing slightly more momentum than expected and pay growth is proving a bit faster than the central bank forecast last month.
The downside for the USD, however, seems cushioned, at least for the time being, amid firming expectations for further policy tightening by the Federal Reserve. The US CPI, PPI and the PCE Price Index released recently indicated that inflation isn't coming down quite as fast as hoped. Moreover, the incoming upbeat US macro data, including the Initial Jobless Claims on Thursday, pointed to an economy that remains resilient, which should allow the US central bank to stick to its hawkish stance for longer. Adding to this, a slew of FOMC members backed the case for higher rate hikes to tame stubbornly high inflation. This should act as a tailwind for the US bond yields and continue to lend some support to the Greenback.
It is worth recalling that the yield on the benchmark 10-year US government bond rose to its highest level since last November and the rate-sensitive two-year Treasury note had shot to levels last seen in July 2007 on Thursday. This, along with the GBP/USD pair's two-way price action witnessed over the past four weeks or so, warrants some caution for aggressive traders and positioning for a firm near-term direction. Next on tap is the release of the final UK Services PMI, which will be followed by the US ISM Non-Manufacturing PMI later during the early North American session. The data might provide some impetus to the major and allow traders to grab short-term opportunities on the last day of the week.
Technical levels to watch
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