- GBP/USD edged higher for the third straight day on Thursday amid modest USD weakness.
- Better-than-expected UK macro releases extended additional support to the British pound.
- Fed rate expectations, BoE’s dovish outlook warrants caution for aggressive bullish traders.
The emergence of some USD selling during the early European session pushed the GBP/USD pair back closer to the mid-1.3100s in the last hour, though the uptick lacked bullish conviction.
Following the previous day's pullback from the 1.3180-1.3185 region, the GBP/USD pair attracted some buying near the 1.3110 area on Thursday and turned positive for the third successive day. The US dollar languished near the two-week low amid the ongoing retracement slide and was seen as a key factor that extended some support to the GBP/USD pair.
The British pound was further underpinned by better-than-expected UK macro data, showing that the economy expanded by 1.3% during the final quarter of 2021 as against the 1% estimated previously. Adding to this, the UK Current Account deficit fell sharply to £7.3 billion in Q4 2021 from the upwardly revised reading of £28.9 billion in the previous quarter.
That said, a combination of factors helped limit any deeper USD losses and capped the upside for the GBP/USD pair, at least for now. The incoming geopolitical headlines dashed hopes for a diplomatic solution to end the war in Ukraine. This, along with the growing prospect of new Western sanctions against Russia, extended some support to the safe-haven buck.
In the latest developments surrounding the Russia-Ukraine saga, a Kremlin spokesperson said on Wednesday that they have not noticed anything that looks like a breakthrough in negotiations. Moreover, an adviser to Ukraine’s President noted that Russia is transferring forces from Kyiv to encircle troops and launch attacks
in the eastern part of the country.
Apart from this, expectations that the Fed will adopt a more aggressive policy stance to combat high inflation favour the USD bulls. In fact, the markets have been pricing in a 50 bps rate hike move at the next two meetings. Conversely, the Bank of England has softened its tone on the need for further rate hikes. This, in turn, should keep a lid on the GBP/USD pair.
Market participants now look forward to the US economic docket, highlighting the release of the Core PCE Price Index - the Fed's preferred inflation gauge. The focus, however, will remain on fresh developments surrounding the Russia-Ukraine saga. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the GBP/USD pair.
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 trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.