- GBP/USD gains strong positive traction on Tuesday and snaps a four-day losing streak.
- A positive risk tone prompts some selling around the safe-haven USD and lends support.
- Bets for more Fed rate hikes should help limit the USD losses and cap any further gains.
The GBP/USD pair catches fresh bids on Tuesday and snaps a four-day losing streak to over a one-week low, around the 1.2345 region touched the previous day. The pair sticks to its strong intraday gains heading into the North American session and trades around the 1.2435-1.2440 area, just a few pips below the daily high.
The US Dollar (USD) meets with some supply and stalls a four-day-old recovery trend from over a two-month low touched last week, which, in turn, is seen pushing the GBP/USD pair higher. A generally positive tone around the equity markets is seen as a key factor undermining the Greenback’s relative safe-haven status, though speculations that the Federal Reserve (Fed) may continue raising interest rates should help limit losses.
. In fact, the current market pricing indicates a greater chance of a 25 bps lift-off at the next FOMC monetary policy meeting in May and the bets were lifted by the mostly upbeat US employment details (NFP) released on Friday. This, for the time being, puts a floor under the US Treasury bond yields, which should further act as a tailwind for the buck and keep a lid on any further gains for the GBP/USD pair, at least for time being.
Furthermore, the recent mixed signals from the Bank of England (BoE) members over the next policy move might also hold back traders from placing aggressive bullish bets around the British Pound. Investors might prefer to move to the sidelines ahead of this week’s release of the latest US consumer inflation figures and the FOMC meeting minutes, both scheduled on Wednesday, followed by the US Retail Sales data on Friday.
In the absence of any relevant market-moving economic releases on Tuesday, either from the UK or the US, the broader risk sentiment could play a key role in influencing the USD price dynamics. Apart from this, the broader risk sentiment, which tends to drive the demand for safe-haven assets, including the buck, might allow traders to grab short-term opportunities around the GBP/USD pair.