GBP/USD unable to recover 1.2300, despite risk appetite and steady US yields

The GBP/USD is rising for the second day in a row, supported by a decline of the US dollar across the board amid risk appetite. The pair peaked at 1.2323 and then pulled back after being unable to hold above 1.2300.

Cable’s slide eventually found support around the 1.2250 area and then bounced back to the upside, unable to recover 1.2300. It is hovering around 1.2270/80, up 30 pips for the day.

The US dollar is mostly lower on Tuesday as stocks rise. After the worst week in years, US indices are rising sharply with the S&P 500 up 2.52% and the Nasdaq making gains of 3.15%. US yields are marginally higher, with the US 10-year at 3.28% and the 30-year at 3.35%.

Economic data released on Tuesday in the US, showed Existing Home sales prices reached a record high in May of $407.600. The annual rate of sales declined from 5.6 to 5.41 million. It was the fourth monthly decline in a row. On Wednesday, Fed Chair Powell will deliver the semiannual testimony at Congress.

In the UK, rail workers are holding a 24-hour strike, the biggest in more than 30 years. The union rejected the latest offer from companies. The Bank of England is expected to continue to raise the key interest rate to curb inflation.

Huw Pill, Chief Economist at the BoE said the central bank is prepared to sacrifice growth to fight against inflation. “While that may seem like an obvious statement, the bank is doing a better job of addressing the tradeoffs involved than it did earlier this year, when it seemed reluctant to hike rates. Pill added that the bank was prepared to act “more aggressively.”  Of note, Saunders, Mann, and Haskel dissented last week in favor of a larger 50 bp move.  We suspect that 6-3 vote has already shifted to at least 5-4 in favor of a 50 bp hike at the next meeting”, explained analysts at BBH.

Technical levels