- A combination of supporting factors assisted GBP/USD to attract some dip-buying on Wednesday.
- Upbeat UK macro releases reaffirmed the optimistic outlook and underpinned the British pound.
- Softer US bond yields capped the USD recovery and further extended support ahead of the US CPI.
The GBP/USD pair recovered its early lost ground and was last seen trading near the top end of its intraday trading range, just below mid-1.4100s.
The pair struggled to capitalize on its recent strong gains recorded over the past three sessions and witnessed some selling during the first half of the trading action on Wednesday. The prevalent risk-off mood drove some haven flows towards the US dollar and was seen as a key factor exerting pressure on the GBP/USD pair.
The global risk sentiment took a hit amid an escalation of conflict between Israel and Palestinian militant group, sparked by unrest at Jerusalem’s Al-Aqsa Mosque. This comes on the back of worries that rising inflationary pressure might force the Fed to hike rates earlier than anticipated, which dented investors’ confidence.
The early downtick, however, turned out to be short-lived and was quickly bought into amid the optimistic outlook for the UK economy. This was reinforced by Wednesday’s upbeat UK macro releases, which showed that the economy expanded by 2.1% MoM in March. This was accompanied by an upward revision of the previous month’s reading.
Adding to this, the UK Industrial/Manufacturing Production figures and Goods Trade Balance also came in better than consensus estimates. This, in turn, assisted the GBP/USD pair to attract some dip-buying near the 1.4100 mark. Apart from this, a modest USD pullback from daily tops further extended some support to the major.
A softer tone surrounding the US Treasury bond yields kept a lid on the attempted USD recovery from over 10-week lows touched in the previous session. That said, traders seemed reluctant to place any aggressive bullish bets around the GBP/USD pair, rather preferred to wait on the critical US CPI report, due later during the early North American session.
Technical levels to watch
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