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GBP/USD reaches multi-week high, seeks 1.1600 amid US supply

GBP/USD rises to a brand-new six-week high, helped by several reasons. Sterling continues to be supported by Rishi Sunak’s selection as the next British Prime Minister.

The likelihood of additional aggressive Fed rate increases is declining, which is harmful to the dollar. In the past hour, the GBP/USD pair has seen new bids during the early European session, rising to its highest since September 14 in the 1.1575-1.1580 range.

The selection of Rishi Sunak as the next British prime minister was well-received by investors. This is seen by a continued drop in UK gilt yields, which support the British pound. In addition, the pervasive US dollar selling bias gives the GBP/USD pair an extra boost and keeps the trend going.

In fact, as expectations for a more aggressive tightening by the Fed decline, the USD Index, which gauges the dollar’s performance against a basket of currencies, plunges again closer to the monthly low. The world’s biggest economy is showing symptoms of slowing down, according to Tuesday’s dismal US macro data, which may prompt the Fed to tone down its aggressive approach.

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The recent decline in US Treasury bond rates is extended due to the Fed repricing its rate-hiking path, which is perceived as impacting the US dollar. Additionally, indications of market stability lessen the dollar’s reputation as a haven and raise the possibility of future GBP/USD appreciation.

A decisive break in the 1.1480 supply zone and a subsequent advance beyond the psychological level of 1.1500 provide credibility to the optimistic view, even from a technical standpoint. However, concerns over a deepening global economic recession might dampen the excitement and prevent bulls from making risky wagers on the GBP/USD pair.

Market players are now anticipating the publication of US new home sales data. This will push the USD and give the GBP/USD pair some momentum ahead of significant US macro announcements on Thursday, coupled with the US bond rates and the general risk attitude. Next week’s FOMC meeting and NFP data will then come into focus.

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