Home Forex GBP/USD hits 7-month high but slips below 1.2380 as US bond yields rise

GBP/USD hits 7-month high but slips below 1.2380 as US bond yields rise

by SuperiorInvest
  • GBP/USD printed a new two-day low around 1.2323, although it stabilized around 1.2370s, but remained negative during the day.
  • Money market futures expect the Bank of England to hike by 50 bps at its next meeting.
  • However, the US economic filing would be busy, containing GDP, jobless claims and the Fed’s preferred gauge of inflation.

Pound Sterling (GBP) is retreating after hitting a seven-month high at 1.2447, although it lacked the strength to hold 1.2400 and is trading in the 1.2380s area. At the time of writing, GBP/USD is exchanging hands at 1.2375, a minimal margin below its opening price.

The U.S. dollar is rising thanks to high yields on U.S. government bonds

Sentiment remains positive, as shown by Wall Street trading in the green. Factors such as a steady US dollar and US Treasury yields holding its gains are weighing on the GBP/USD pair. A lack of economic data from the US and the UK is forcing investors to rely on last week’s news and interest rate hike expectations.

Last week the British consumer Price index (CPI), with inflation remaining at 10.5%, although easing from 10.7% in the previous month last month. This raised the likelihood of a rate hike by 50 bps Bank of England (BoE), which according to Reuters has a 70% chance, while a 25 bps rate hike is fully factored in.

Meanwhile, National Grid has asked some UK households to reduce their energy use today and is likely to extend the request until tomorrow due to a drop in wind power linked to the cold snap across the country.

On the U.S. front, Fed officials entered a blackout period to help traders lean on the current week’s economic calendar. The US paper will include gross domestic product (GDP) results for the fourth quarter, with estimates around 2.6% quarter-on-quarter. Also, a flash PMI, jobless claims, durable good orders and the Fed’s favorite inflation gauge, personal consumption expenditures (PCE), would provide fresh impetus to gold traders.

Key GBP/USD Technical Levels

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