The GBP/USD currency pair is trading with a slight upward tilt for the third consecutive day, hovering just above the 1.2700 level during the Asian trading session on Thursday. However, it fails to exhibit a strong bullish momentum and remains beneath the weekly high recorded on Monday.
The subdued price action of the US Dollar (USD) is providing support to the GBP/USD pair. Traders are adopting a wait-and-see approach in anticipation of the release of the US Nonfarm Payrolls (NFP) report on Friday, which has led to the sideways consolidation of the USD. This has, in turn, been beneficial for the GBP/USD. Nevertheless, expectations of a less accommodative stance from the Federal Reserve (Fed) have caused a mild increase in US Treasury bond yields, lending some strength to the Greenback.
Investors are now of the view that the tariff plans and expansionary policies of US President-elect Donald Trump will fuel inflation. Additionally, remarks made by several prominent FOMC members, including Fed Chair Jerome Powell, on Wednesday, signaled that the US central bank will be cautious about reducing interest rates. This has resulted in a modest recovery in US Treasury bond yields and has bolstered the USD.
Furthermore, ongoing geopolitical risks arising from the intensifying Russia-Ukraine conflict and concerns over trade wars are also bolstering the safe-haven status of the USD. Meanwhile, the British Pound (GBP) bulls have been restrained following Bank of England (BoE) Governor Andrew Bailey’s projection of four interest rate cuts in 2025. This has further limited the upside potential of the GBP/USD pair and calls for caution among bullish investors.
Looking ahead, traders are anticipating the release of the UK Construction PMI for some market direction prior to the US Weekly Initial Jobless Claims data during the early North American session. However, the immediate market reaction is likely to be muted as the spotlight remains firmly fixed on the highly anticipated US monthly employment figures, which will influence the Fed’s future policy decisions.
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