- GBP/USD is unable to sustain its modest intraday gains despite subdued USD price action.
- Less aggressive comments from Fed officials the day before keep dollar bulls on the defensive.
- Fears of a recession act benefit the USD and limit the rise of the pair.
- Investors are now waiting for US macroeconomic releases to take advantage of significant opportunities.
The pair GBP/USD has struggled to capitalize on its modest intraday gains and has attracted some selling near the 1.1850 area on Friday. The pair has pulled back to the lower end of its daily range at the start of the European session and is now trading just above the 1.1800 level.
Fed Governor Christopher Waller and St. Louis Fed President Jim Bullard, the Fed’s biggest hawks, tried to counter market expectations of a 100 basis point rate hike later this month. In fact, the implied odds of a large rally on July 27 have fallen sharply. This was evidenced by a further decline in US Treasury yields, which kept dollar bulls on the defensive and offered some support to the GBP/USD pair.
However, the pair’s rally lacked bullish conviction amid the growing fears of a recessionwhich continued to weigh on investor sentiment and acted as a tailwind for the US dollar dand safe haven. Also, political uncertainty in the UK, coupled with Brexit woes, clouded prospects for further tightening by the Bank of England and weighed on the pound sterling. The combination of factors helped to limit the GBP/USD gains.
The fundamental background supports the prospects for further losses as bears seemed reluctant to open aggressive GBP/USD positions ahead of key US macro data. The Empire State Manufacturing Index, Industrial Production and the Michigan Consumer Sentiment Index will be released on Friday’s US economic docket.
Additionally, Atlanta Fed President Raphael Bostic’s speech and US bond yields will influence dollar dynamics. Investors will follow the broader market risk sentiment to take advantage of some short-term opportunities around GBP/USD on the last day of the week.
GBP/USD technical levels
Source: Fx Street
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