- GBP/USD attracts some dip-buying on Thursday, albeit struggles to build on the move up.
- Bets for bigger Fed rate cuts, sliding US bond yields undermine the USD and lend support.
- Dovish BoE expectations and social unrest in the UK keep a lid on any gains for the GBP.
The GBP/USD pair once again shows some resilience below the 100-day Simple Moving Average (SMA) and attracts dip-buyers in the vicinity of over a one-month low touched earlier this week. Spot prices, however, struggle to capitalize on the uptick and currently trade with only modest intraday gains, around the 1.2700 round-figure mark.
The US Dollar (USD) comes under some renewed selling pressure in the wake of rising bets for bigger interest rate cuts by the Federal Reserve (Fed), which triggers to a fresh leg down in the US Treasury bond yields. This, in turn, offers some support to the GBP/USD pair, though a softer risk tone helps limit losses for the safe-haven buck and acts as a headwind.
The market sentiment remains fragile on the back of growing concerns about an economic downturn in China and a possible US recession. Apart from this, geopolitical risks stemming from the ongoing conflicts in the Middle East temper investors’ appetite for riskier assets, which, along with dovish Bank of England (BoE) expectations, caps the GBP/USD pair.
In fact, the BoE lowered interest rate for the first time in more than four years, from a 16-year high to 5.0% last Thursday. The markets are also pricing in the possibility of two additional interest rate cuts by the end of this year. Apart from this, the ongoing riots in the UK warrant caution for the British Pound (GBP) bulls and positioning for any upside for the GBP/USD pair.
There isn’t any relevant market-moving economic data due for release from the UK on Thursday, while the US economic docket features the usual Initial Weekly Jobless Claims later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the GBP/USD pair.