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  • GBP/USD edged lower on Friday and eroded a part of the previous day’s strong gains.
  • Rising US bond yields revived the USD demand and exerted some downward pressure.
  • The upbeat UK economic outlook, BoE Vlieghe’s hawkish comments helped limit losses.
  • The market focus will remain glued to the release of the Fed’s preferred inflation gauge.

The GBP/USD pair maintained its offered tone through the early part of the European session, albeit lacked any strong follow-through selling. The pair was last seen trading around the 1.4185-80 region, down nearly 0.15% for the day.

The pair continued with its struggle to find acceptance above the 1.4200 round-figure mark and witnessed some selling on the last trading day of the week. The downtick was exclusively sponsored by a goodish pickup in the US dollar demand and forced the GBP/USD pair to erode a part of the previous day’s strong positive move.

The USD found some support from a follow-through uptick in the US Treasury bond yields, bolstered by reports that US President Joe Biden will announce a $6 trillion budget for the fiscal year 2022. The coming supply of government debt stoked fears about rising inflationary pressures, which might force the Fed to tighten its monetary policy.

That said, a combination of supporting factors held traders from placing any aggressive bearish bets around the GBP/USD pair. On Thursday, the Bank of England’s MPC member Gertjan Vlieghe indicated that the central bank could raise rates well into next year if there is a smooth transition from furlough and the economy rebounds more quickly than expected.

This comes on the back of the optimistic outlook for the UK economic recovery from the pandemic amid the gradual easing of lockdown measures.  In fact, UK Prime Minister Boris Johnson also said there is nothing in the data currently to delay the plan to end restrictions fully on June 21. This should continue to act as a tailwind for the British pound.

Investors also seemed reluctant, rather preferred to wait on the sidelines ahead of Friday’s release of the Fed’s preferred inflation gauge. The US Bureau of Economic Analysis is scheduled to release the core PCE Price Index later during the early North American session, which will influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch