12 July 2024, GBP/USD
Event to watch out for today:
15:30 GMT+3. USD - Producer Price Index
17:00 GMT+3. USD - Consumer Sentiment Index from the University of Michigan
GBPUSD:
The Pound-Dollar pair fluctuated between weak gains and minor losses around the 1.2900 mark during the Asian session on Friday and remains within striking distance of the yearly peak reached the previous day. The US Dollar (USD) is attracting some buyers on the back of a good rise in US Treasury yields and is moving away from the near three-month low reached the day before, which in turn acts as a headwind for GBP/USD. Meanwhile, weaker US consumer inflation data released on Thursday raised market bets on the imminent start of the Federal Reserve's (Fed) rate cut cycle in September. This could curb a significant rise in U.S. bond yields. In addition, the prevailing risk-on bias may deter traders from aggressively bullish bets on the safe-haven Dollar.
The British Pound (GBP), on the other hand, continues to receive support from data released on Thursday that the UK economy grew at a faster-than-expected 0.4% in May. This comes on the back of recent comments from Bank of England (BoE) policymakers that dashed hopes of a rate cut in August. On Wednesday, Bank of England MPC member Catherine Mann said that until there is a slowdown in service price growth, she would not advocate an interest rate cut. To add to this, Hugh Pill, the Bank of England's chief economist, noted that there is still some work to be done before the domestic permanent component of inflation disappears.
The aforementioned fundamental backdrop seems to be leaning in favor of the bulls and suggests that the path of least resistance for the GBP/USD pair lies to the upside. Thus, any significant corrective decline could still be seen as a buying opportunity and is likely to remain limited. Nevertheless, spot prices remain on track to end a third consecutive week in the green. Traders now await the release of the US Producer Price Index (PPI) and the University of Michigan Consumer Sentiment Survey due later in the North American session, looking for short-term opportunities on the last day of the week.
Trading recommendation: Trade predominantly with Buy orders from the current price level.
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