GBP/USD grinds higher around mid-1.2700s with eyes on BoE’s Bailey, Fed Chair Powell
- GBP/USD holds onto the previous day’s recovery moves after snapping three-day downtrend.
- Market’s cautious optimism, hawkish comments from BoE’s Dhingra underpin Cable pair’s rebound.
- Upbeat US data, cautious mood ahead of top-tier central bankers’ speeches at ECB Forum prod Pound Sterling buyers.
GBP/USD defends the previous day’s notable rebound, as well as the first daily gains in four, as it makes rounds to 1.2750 during early Wednesday morning in Asia. In doing so, the Cable pair portrays the typical pre-event anxiety ahead of the scheduled speeches from the top-tier central bankers at the European Central Bank (ECB) Forum in Sintara.
On Tuesday, the market’s optimism surrounding the global economic recovery, backed by China, joined hawkish comments from Bank of England (BoE) Policymaker Swati Dhingra to underpin the GBP/USD pair’s run-up despite strong US data.
BoE’s Dhingra said on Tuesday, “There are some promising signals that UK CPI should ease, based on big fall in producer price inflation,” per Reuters.
On the other hand, a slew of the US data allowed the US Dollar to pare intraday losses during late Tuesday but failed to reverse the daily loss of the greenback amid optimism. That said, US Durable Goods Orders marked a surprise growth of 1.7% for May versus -1.0% market forecasts and 1.2% prior (revised). Further, the US Conference Board’s (CB) Consumer Confidence Index rose to 109.7 for June from 102.5 in May (revised from 102.3). On the same line, US Housing Price Index rose to 0.7% in April from 0.5% in previous readings (revised), versus 0.3% expected. Meanwhile, the S&P/Case-Shiller Home Price Index came in as -1.7% YoY for April, down from -1.1% prior but better than -2.6% market forecasts. Additionally, New Home Sales rose 12.2% MoM in May from 3.5% prior and 0.5% anticipated whereas the Richmond Fed Manufacturing Index improved to -7.0 in June compared to -15.0 prior and -10.0 expected.
Elsewhere, headlines suggesting Asian lobbyists are advocating for easier rules for Chinese equities’ overseas listing and comments from Premier Li Qiang joined the People’s Bank of China’s (PBoC) lower-than-expected fixing of the USD/CNY price to favor the optimism. Further, the US Dollar selling by major Chinese state banks, per Reuters, also allowed the GBP/USD pair to remain firmer.
Against this backdrop, Wall Street closed with notable gains for the first time in three days while the US Treasury bond yields recovered.
Moving on, market players may witness further weakening of the US Dollar despite the recently firmer US data favoring the Fed rate hike expectations, amid the economic optimism. However, the cautious mood ahead of speeches from BoE Governor Andrew Bailey and Federal Reserve Chairman Jerome Powell at the ECB Forum in Sintra could prod the Pound Sterling bulls.
Technical analysis
GBP/USD pair’s U-turn from the previous monthly high of 1.2680 joins the sustained run-up beyond the 10-day Exponential Moving Average (EMA), at 1.2720 now, to keep the Cable buyers hopeful of witnessing further upside.