GBP/USD retreats near 1.2500 figure after US economic data

  • The British pound is holding on to weekly gains of 0.24%, ahead of key events next week.
  • Sentiment remains gloomy, a headwind for GBP/USD.
  • GBP/USD Price Forecast: Buyers’ inability to retake 1.2600 could open the door for selling pressure.

The British pound slips for the second day in a row, after hitting a daily high near 1.2560, fell back and eyes a retest of the 1.2500 figure. At 1.2509, the GBP/USD fell thanks to a bad mood in the markets, influenced by the ECB, which is about to raise rates, even if it will be done “gradually”, as the President of the ECB admitted, Mrs Lagarde.

Sentiment, high US Treasury yields and a strong dollar weigh on GBP/USD

Additionally, a risky mood is keeping high beta currencies like the GBP under pressure. In the FX space, safe-haven peers led by the greenback’s rise, despite a higher jobless claims reading. Initial jobless claims for the week ending June 4 rose by 229,000, worse than the 210,000 expected. The report shows that while the labor market remains tight, data indicates that there has been an increase in layoffs.

Although this is a negative report, the blame remains in the driver’s seat, boosted by rising US Treasury yields. The 10-year US Treasury yield rose two and a half basis points to 3.051%, supporting the greenback. The US dollar index, a measure of the value of the US dollar against a basket of six currencies, is up almost 0.50% and is back above the 103,000 mark it last reached. times on May 23.

Apart from this, UK Prime Minister Boris Johnson has said it is time to cut taxes in the UK while announcing a home buying scheme, aimed at giving people the opportunity to buy a home.

In the week ahead, the May report of the US Consumer Price Index (CPI) looms. The expectation of the overall figure on an annual basis is 8.3%. The so-called core CPI, which excludes food and energy, is forecast at 5.9% year-on-year. Additionally, the University of Michigan Consumer Sentiment Report will shed light on household sentiment on the US economy, as well as five-year inflation expectations.

GBP/USD Price Prediction: Technical Outlook

The GBP/USD daily chart shows that the pair remains under pressure, although it is consolidating in a wide range of 1.2450 to 1.2600. The daily moving averages (DMA) remain above the exchange rate and accelerate downward. It should be noted that the Relative Strength Index (RSI), pushed into positive territory, albeit recently, has returned below the 50 midline, which has exacerbated the GBP/USD’s slide over the past two days.

Therefore, the GBP/USD bias favors sellers. The first GBP/USD support would be the 1.2500 figure. A break of the latter will send the pair to challenge the June 7th swing low at 1.2430. Once broken, the next level of demand would be the daily low of 1.2313 on May 17, followed by the year-to-date low of 1.2155.

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