The GBP/USD pair has demonstrated resilience below the 100-day Simple Moving Average (SMA), attracting dip-buyers near the one-month low touched earlier this week. Despite this, spot prices have struggled to build on this momentum and are currently trading with modest intraday gains around the 1.2700 level.
The US Dollar (USD) has faced renewed selling pressure due to rising bets on significant interest rate cuts by the Federal Reserve (Fed). This expectation has triggered a fresh decline in US Treasury bond yields, providing some support to the GBP/USD pair. However, a softer risk tone has limited losses for the safe-haven USD, acting as a counterbalance.
Market sentiment remains fragile due to concerns about an economic downturn in China and a potential US recession. Additionally, geopolitical risks from ongoing conflicts in the Middle East have tempered investors’ appetite for riskier assets. These factors, along with dovish expectations from the Bank of England (BoE), have capped the gains for the GBP/USD pair.
Last Thursday, the BoE lowered interest rates for the first time in over four years, reducing them from a 16-year high to 5.0%. Markets are also anticipating two more interest rate cuts by the end of the year. Furthermore, ongoing riots in the UK are causing caution among GBP bulls, affecting the positioning for any significant upside in the GBP/USD pair.
There is no significant economic data expected from the UK on Thursday. However, the US economic docket includes the usual Initial Weekly Jobless Claims during the early North American session. These data points, along with US bond yields and broader risk sentiment, will influence USD demand and provide direction for the GBP/USD pair.
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