GBP/USD approaches monthly top surrounding 1.2350, focus on BoE’s Bailey, banking risk

GBP/USD refreshes intraday high near 1.2320 heading into Tuesday’s London open as risk-on mood joins price-positive headlines from the UK to please the Cable buyers. Adding strength to the quote’s upside momentum could be the hopes of witnessing hawkish comments from Bank of England (BoE) Governor Andrew Bailey, especially after he spoke the same the previous day.

On Monday, BoE’s Bailey sensed persistent inflationary pressures while also saying, “If they become evident, further monetary tightening would be required.” Adding strength to the Cable pair’s advances, as well as hopes of more inflation crunch, could be the Brexit barriers and labor problems that challenged the British economy until recently.

On the other hand, the global policymakers’ efforts via stretched emergency credit lines to troubled banks and deposit insurance schemes underpin the firmer sentiment and weigh on the US Dollar, which in turn propels GBP/USD price. Recently adding strength to the risk-on mood and weighing on the greenback are comments from the central bank officials pushing back the banking crisis concerns and the Silicon Valley Bank (SVB) deal.

That said, the US Treasury Department said that the US will keep using tools to prevent banking contagion as needed.  Before that, Federal Reserve Governor Philip Jefferson and Fed Vice Chair for Supervision Michael Barr showed readiness to tame the banking crisis while signaling ease in the inflation woes.

It’s worth noting that the recently downbeat US data weighed on the hawkish Fed bets, especially after talks of US recession, previously teased by Minneapolis Fed President Neel Kashkari, and exerted downside pressure on the US Dollar. On Monday, the US Dallas Fed Manufacturing Business Index dropped to -15.7 in March versus -10.9 expected and -13.5 prior.

Against this backdrop, the US 10-year and two-year Treasury yields grind near 3.52% and 3.98% respectively by the press time, proding the week-start rebound after witnessing a three-week downtrend. That said, the stocks in the Asia-Pacific zone traded mixed while S&P 500 Futures print mild gains at the latest.

Looking ahead, GBP/USD bulls will seek more hawkish comments from BoE’s Bailey, as well as softer prints of the US Conference Board’s (CB) Consumer Confidence for March, to keep the buyers in the driver’s seat.

Technical analysis

GBP/USD stretches the previous run-up from the 50-bar Simple Moving Average (SMA) and the 61.8% Fibonacci retracement level of the quote’s January-March downside, around 1.2220 and 1.2200 respectively supports amid the impending bulls cross on the MACD. That said, the previous week’s confirmation of the rising wedge bearish chart pattern keeps the Cable pair sellers hopeful unless the quote stays below the previous support line of the wedge, near 1.2330 by the press time.