- GBP/USD picks up bids to print mild gains, pares weekly losses.
- US dollar bears the burden of market’s cautious optimism ahead of the key event.
- Power bill crisis in the UK, Brexit pessimism adds to the upside barriers.
- US Q2 GDP, Core PCE data may entertain traders ahead of Powell’s showdown at Jackson Hole.
GBP/USD renews intraday high around 1.1815 as it consolidates the weekly losses amid the US dollar pullback during Thursday’s Asian session. The cable pair’s latest gains could also be linked to the hopes that the next UK government will be better in shape and action.
Britain's next prime minister must adopt radical ideas – such as discounted power tariffs, energy bill freezes or a "solidarity" tax hike for higher earners – to cushion the energy price shock for a broad swathe of households, Reuters quotes the UK’s think tank the Resolution Foundation on Thursday.
It’s worth noting that the recently increased odds favoring ex-Chancellor Rishi Sunak to become the next UK Prime Minister (PM) keep the GBP/USD buyers hopeful as he defends the Bank of England (BOE) while also braces for less spending and control to the power bill. Also favoring Sunak’s chances of being the UK PM is the medium bias towards Brexit and his financial knowledge, especially at the time of the recession fears.
On the other hand, US Dollar Index (DXY) began Wednesday on a firmer footing before retreating towards 108.50, down 0.15% at the latest, as equities pared recent losses amid a lack of too-strong US data. Also exerting downside pressure on the greenback’s gauge versus the six major currencies was the indecision among the latest Fedspeak and market chatters that Fed Chair Powell may repeat his economic fears and may refrain from too hawkish comments at the Jackson Hole Symposium.
US Durable Goods Order for July dropped to 0.0% versus 0.6% expected and an upwardly revised 2.2% previous reading. However, Nondefense Capital Goods Orders ex Aircraft rose past 0.3% market consensus to 0.4%, versus 0.9% prior. Further, Pending Home Sales improved to -1.0% MoM in July versus -4.0% expected and -8.9% prior (revised down from -8.6%). On a yearly basis, the Pending Home Sales decreased by 19.9%, versus the previous contraction of 20.0%.
Amid these plays, the US 10-year Treasury yields rose the most in a week while refreshing a two-month high of around 3.10% whereas the Wall Street benchmarks printed mild gains, which in turn helped S&P 500 Futures to remain mildly bid at around 4,150 at the latest.
Looking forward, the second version of the US Q2 GDP will join the US Personal Consumption Expenditure (PCE) for the stated period to decorate the calendar. However, major attention will be given to Jackson Hole for fresh impulse. It's worth noting that Morgan Stanley recently mentioned in its analytics that they continue to see the weak growth outlook weighing on GBP. However, we do not see a material leg lower in GBP from here given how low growth expectations already are and how bearish sentiment is already on GBP.
Technical analysis
GBP/USD bears seem running out of steam around the multi-month low but the buyers need validation from June’s low of 1.1933 to retake control.