- GBP/USD edged lower for the second straight session, though lacked follow-through selling.
- The upbeat UK economic outlook underpinned the British pound and extended some support.
- A combination of factors capped the USD upside and assisted the pair to bounce off daily lows.
The GBP/USD pair managed to recover a major part of its intraday losses and was seen trading with modest losses, just below mid-1.4100s during the early North American session.
The pair witnessed some selling for the second consecutive session on Thursday and added to the previous day’s hotter-than-expected US CPI-inspired losses. The downfall pulled the GBP/USD pair away from two-and-half-month tops, around the 1.4165 region touched on Tuesday, though stalled near the key 1.4000 psychological mark.
A modest pullback in the US Treasury bond yields, along with a goodish rebound in the equity markets held traders from placing aggressive bullish bets around the safe-haven US dollar. On the other hand, the upbeat UK economic outlook continued acting as a tailwind for the British pound and helped limit losses for the GBP/USD pair.
Meanwhile, the market reaction had a rather muted reaction to a duo of upbeat US economic releases, showing that the Initial Weekly Jobless Claims fell to 473K during the week ended May 7. This was below the 490K anticipated and the previous week’s upwardly revised reading of 507K (498K reported initially).
Separately, the US Producer Price Index rose 0.6% in April and the year rate surged to 6.2%, beating market expectations. Adding to this, core CPI (excluding food and energy) also surpassed consensus estimates and came in at 0.7% MoM and 4.1% YoY, which fueled fears about runaway inflation, though did little to impress the USD bulls.
From a technical perspective, the emergence of some dip-buying near the 1.4000 round-figure warrants some caution for bearish traders. This makes it prudent to wait for some strong follow-through selling before confirming that the GBP/USD pair has topped out in the near term and positioning for any further depreciating move.
Technical levels to watch
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