- GBP/USD catches aggressive bids on Friday amid broad-based USD weakness.
- The risk-on impulse prompts some long-unwinding round the safe-haven buck.
- Aggressive Fed rate hike bets, the UKs bleak economic outlook might cap gains.
The GBP/USD pair gains strong positive traction on Friday and continues scaling higher through the first portion of the European session. The momentum lifts spot prices to a one-and-half-week high, nearer to mid-1.1600s, and is sponsored by the heavily offered tone surrounding the united states dollar.
A goodish recovery in the chance sentiment – as depicted by way of a positive tone round the equity markets – drags the safe-haven buck further from a two-decade high touched earlier this week. Actually, the main element USD Index, which measures the greenback’s performance against a basket of currencies, dives to a brand new monthly low and actually is an integral factor behind the GBP/USD pairs intraday momentum to the upside.
The British pound, however, draws support from the brand new UK Prime Minister Liz Truss’s plans to cap energy bills for another two years, that is regarded as a welcome development for households. Having said that, the worsening outlook for the united kingdom economy might continue steadily to become a headwind for sterling. Aside from this, hawkish Fed expectations should limit the USD corrective slide and cap the GBP/USD pair.
The markets seem convinced that the Fed will adhere to its aggressive policy tightening way to tame inflation and also have been pricing in a larger potential for a 75 bps rate hike at the September meeting. The bets were reaffirmed by Fed Chair Jerome Powell’s hawkish remarks on Thursday, which underpinnedelevated US Treasury bond yields and support prospects for the emergence of some USD dip-buying.
Hence, it’ll be prudent to hold back for strong follow-through buying before confirming that the GBP/USD pair has formed a near-term bottom round the 1.1400 mark and positioning for just about any further gains. In the lack of any major market-moving economic releases, speeches by Fed officials might influence the USD later through the early UNITED STATES session and offer some impetus to the GBP/USD pair.
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