GBP/USD hit a 7-month high but dropped beneath 1.2380 as US bond yields rise
- GBP/USD printed a new two-day low around 1.2323, though stabilized around 1.2370s, but stayed negative in the day.
- Money market futures expect the Bank of England would hike 50 bps at its next meeting.
- US economic docket would be busy, though, featuring GDP, unemployment claims, and the Fed’s preferred inflation gauge.
The Pound Sterling (GBP) is retreating after hitting a seven-month high at 1.2447, though it lacked the strength to hold to the 1.2400 figure and is meandering in the 1.2380s area. At the time of writing, the GBP/USD exchanges hands at 1.2375, below its opening price by a minimal margin.
US Dollar climbs underpinned by high US Treasury yields
Sentiment remains upbeat, as shown by Wall Street’s trading in the green. Factors like a steady US Dollar and US Treasury bond yields holding to its gains weigh the GBP/USD pair. The lack of US and UK economic data keeps investors leaning on last week’s news and expectations for interest rate hikes.
Last week’s UK’s Consumer Price Index (CPI) report, with inflation staying at 10.5% though eased from 10.7% of its last month’s previous reading. That increased the likelihood of a 50 bps rate hike by the Bank of England (BoE), which according to Reuters, stand at a 70% chance, while a 25 bps rate lift is fully priced in.
In the meantime, National Grid has asked some UK households to cut energy use today and is likely to extend that request to tomorrow due to a drop in wind power coupled with freezing temperatures across the nation.
On the US front, Fed officials entered its blackout period so that traders would lean on the current week’s economic calendar. The US docket will feature Gross Domestic Product (GDP) results for Q4 with around 2.6% QoQ estimates. Also, Flash PMIs, Unemployment Claims, Durable Good Orders, and the Fed’s favorite gauge for inflation, Personal Consumption Expenditures (PCE), would provide fresh impetus to Gold traders.