- GBP/USD rallies to a fresh multi-month high on Thursday amid the prevalent USD selling bias.
- Powell’s dovish remarks on Wednesday drags US bond yields lower and weigh on the buck.
- The technical set-up favours bullish traders and supports prospects for further near-term gains.
The GBP/USD pair builds on the overnight solid bounce from the 1.1900 mark, or the weekly low and gains strong follow-through traction for the second successive day on Thursday. The positive momentum remains uninterrupted through the early North American session and lifts spot prices to the 1.2200 mark, or the highest level since August 12.
The US Dollar struggles to gain any meaningful traction and remains depressed near a multi-month low, which, in turn, acts as a tailwind for the GBP/USD pair. Fed Chair Jerome Powell sent a clear message on Wednesday that the US central bank could soon slow the pace of its policy tightening as soon as in December. This leads to a further decline in the US Treasury bond yields and continues to weigh on the Greenback.
Apart from this, a generally positive tone around the equity markets is seen as another factor exerting downward pressure on the safe-haven buck and benefiting the high beta British Pound. The aforementioned supporting factors help offset the overnight dovish remarks by Bank of England (BoE) Chief Economist Huw Pill. Even a bleak outlook for the UK economy fails to dent the bullish sentiment surrounding the GBP/USD pair.
With the latest leg up, spot prices move back above a technically significant 200-day Simple Moving Average (SMA) for the first time in 2022. This could be seen as a fresh trigger for bullish traders and might have already set the stage for a further near-term appreciating move. Traders now look to the US economic docket, featuring the Personal Consumption Expenditures Price Index (the Fed’s preferred inflation gauge) and the ISM Manufacturing PMI.
The data, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and provide some impetus to the GBP/USD pair. The focus will then shift to the release of the closely-watched US monthly jobs report – popularly known as NFP. Nevertheless, the technical set-up seems tilted in favour of bullish traders and suggests that the path of least resistance for the pair is to the upside.
Technical levels to watch