GBP/USD rises for the second day and reaches a new weekly high. Bets on the Fed raising rates less aggressively weigh on the USD and strengthen the pair. The GBP is supported by better-than-expected UK PMI, which also supports the upward trend.
Ahead of the crucial FOMC minutes, investors are now looking to US macro data for some dynamism.
For the second straight day on Wednesday, the GBP/USD pair builds on the previous day’s upward movement and finds some follow-through strength. The pair retains a buy tone through the early North American session and is now trading close to the weekly high, just below the mid-1.1900s.
The US Dollar bulls are on the defensive due to several issues, which is a positive for the GBP/USD pair. Investors have been pricing a higher likelihood of a modest 50 bps lift-off in December as the US central bank seems to be slowing the pace of its rate-hiking cycle. The safe-haven Greenback continues to be pressured by this and an upbeat atmosphere in the equities markets.
On the other hand, the British pound receives support from speculations that the UK government may want to pursue a partnership with the EU in the Swiss manner. This follows speculation that the Bank of England may increase interest rates even more to control inflation. Further supporting the Sterling and driving the GBP/USD pair higher is the flash UK PMI data, which indicated that economic activity slowed less than anticipated in November.
In addition to the aforementioned underlying causes, the potential for specific short-term trade stops to be activated on further gains above the 1.1900 level gives current prices an extra boost. However, the UK economy’s gloomy outlook might limit further rises for the GBP/USD pair. Additionally, traders could hesitate from making risky wagers in favor of holding off until the FOMC minutes are published, which is scheduled to happen later during the US session.
The US economic calendar, which includes the publication of their flash PMIs, Durable Goods Orders, Weekly Initial Jobless Claims, and New Home Sales, may provide the GBP/USD pair some momentum. However, given that investors are awaiting new information on the Fed’s policy stance and the trajectory of future rate hikes, the market’s response to the US macro data is more likely to be modest. This will affect the USD price dynamics and decide the major’s short-term destiny.