- GBP/USD edges lower for the second straight day, though lacks follow-through selling.
- The USD reverses an intraday dip and turns out to be a key factor acting as a headwind.
- Bets for another 25 bps BoE rate hike in May underpin the GBP and limit the downside.
The GBP/USD pair turns lower for the second successive day on Tuesday and weakens further below the 1.2500 psychological mark during the first half of the European session.
The US Dollar (USD) attracts some dip-buying and stands tall near a two-week high touched on Monday, which, in turn, is seen as a key factor exerting downward pressure on the GBP/USD pair. Expectations that the Federal Reserve (Fed) will hike interest rates by 25 bps at the end of the two-day FOMC policy meeting on Wednesday led to the overnight rise in the US Treasury bond yields. Apart from this, a softer risk tone - amid looming recession risks - lends additional support to the safe-haven Greenback.
The markets, meanwhile, seem convinced that the US central bank will signal a pause in its rate-hiking cycle. This might hold back the USD bulls from placing aggressive bets. Moreover, the Bank of England (BoE) is also expected to deliver a 25 bps lift-off in May, which might further contribute to limiting the downside for the GBP/USD pair. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the highest level since June 2022.
On the economic data front, the UK Manufacturing PMI is revised higher and finalized at 47.8 for April as compared to the 46.6 estimated in the flash reading. This, however, does little to impress traders or provide any meaningful impetus to the GBP/USD pair. The US economic docket, meanwhile, features the release of JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and produce short-term trading opportunities around the major.
The focus, however, will remain glued to the highly-anticipated FOMC policy decision, scheduled to be announced during the US session on Wednesday. The market attention will then shift to the closely-watched US monthly employment details, popularly known as the NFP report. This will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for 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 treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.