GBP/USD marches towards 1.2100 as US Dollar retreats despite hawkish Fed talks, focus on UK GDP
- GBP/USD grinds higher around intraday top during three-day uptrend.
- Broad US Dollar weakness, cautious optimism underpin recovery moves despite mixed UK fundamentals.
- British housing market flashes red signals, workers’ strikes are on the top.
- Preliminary readings for UK Q4 GDP in focus amid a light calendar for Thursday.
GBP/USD bulls keep reins for the third consecutive day as the Cable picks up bids to renew intraday high near 1.2085 heading into Thursday’s London open. In doing so, the quote ignores fears surrounding the UK’s economic and political fronties amid broad US Dollar weakness. The reason could also be linked to the pre-data consolidation as the British Gross Domestic Product (GDP) for the fourth quarter (Q4) is up for publishing on Friday.
The US Dollar Index (DXY) traces downbeat Treasury bond yields to reverse the previous day’s recovery moves, down 0.11% intraday near 103.35 at the latest. That said, the US 10-year Treasury bond yields reversed from a one-month high to snap a three-day uptrend on Wednesday, pressured around 3.61% by the press time.
Also weighing on the greenback’s gauge versus the six major currencies could be the cautious optimism in the market. That said, the receding fears of the US-China jitters, following the balloon shooting, join hopes of People’s Bank of China’s (PBOC) rate cuts and the restart of the China-based companies listing on the US exchanges seem to favor risk appetite in Asia.
It’s worth observing that hawkish Fedspeak, including Fed Governor Christopher Waller, New York Federal Reserve President John Williams and Fed Governor Lisa Cook, highlight inflation fears and defended higher rates, while also pushing back the talks of rate cuts in 2023. The same should have favored the US Dollar but did not. On the same line were comments from the US diplomats as Treasury Secretary Janet Yellen mentioned, “While inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy.” Elsewhere, US President Joe Biden said during a PBS interview that there will be no US recession in 2023 or 2024.
At home, the UK Royal Institution of Chartered Surveyors (RICS) survey data mentioned earlier in the day that Britain's housing market suffered the most widespread price falls since 2009 last month as the run of interest rate increases over the past year weighed on would-be buyers.
Against this backdrop, the market witnesses a mild optimism and weigh on the US Dollar. The same could be witnessed in the US 10-year Treasury bond yields which reversed from a one-month high to snap a three-day uptrend on Wednesday, pressured around 3.61% at the latest. The same helped S&P 500 Futures to ignore Wall Street’s downbeat closing and remain mildly bid as of late.
Technical analysis
Although a three-month-old ascending support line restricts GBP/USD downside near the 1.2000 psychological magnet, recovery remains elusive unless the quote stays below 50-DMA hurdle surrounding 1.2190.