- On Tuesday, GBP/USD is trading with a moderately favorable predisposition amidst controlled USD cost action.
- Fed rate cut bets have triggered a fresh leg down in the United States bond yields and weakened the USD.
- A softer risk tone is assisting in limiting losses for the safe-haven dollar and keeping a lid on the pair.
During the Asian session on Tuesday, the GBP/USD pair is edging higher and looking to build on the overnight bounce from the 1.2600 mark. Current rates hover around the 1.2630-1.2635 area and are drawing support from a mix of factors.
The US Dollar (USD) struggles to benefit from the previous day’s strong rally amidst expectations of a potential interest rate cut by the Federal Reserve (Fed). This has triggered a fresh decline in the US Treasury bond yields, keeping the USD bulls on the defensive, which is considered a key factor as a tailwind for the GBP/USD pair.
Meanwhile, the British Pound (GBP) is supported by decreasing chances for an early rate cut by the Bank of England (BoE). BoE Governor Andrew Bailey recently cautioned that it was too early to declare victory over inflation, adding to the uptick in the GBP/USD pair.
However, a softer risk tone is providing support to the safe-haven Greenback and preventing aggressive directional bets. Investors are also hesitant and prefer to wait on the sidelines ahead of today’s key US macro data. The focus will remain on the US NFP report on Friday.
The above fundamental background suggests that the path of least resistance for the GBP/USD pair is to the upside. It would still be prudent to wait for a sustained move beyond the 1.2725-1.2730 supply zone before positioning for any further appreciation.
Technical levels to watch
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