GBP/USD sticks to modest recovery gains, lacks follow-through beyond 1.3100 mark
- GBP/USD gained some positive traction on Thursday, though struggled to capitalize on the move.
- The Fed’s hawkish outlook, a softer risk tone underpinned the safe-haven USD and capped gains.
The GBP/USD pair retreated a few pips from the daily high touched during the early European session and was last seen trading with modest intraday gains, around the 1.3080-1.3085 region.
The pair gained some positive traction during the first half of the trading on Thursday and moved away from the three-week low, around the 1.3045 area touched the previous day. The uptick, however, lacked bullish conviction or find acceptance above the 1.3100 round-figure mark amid the emergence of fresh buying around the US dollar, bolstered by the Fed's hawkish outlook.
In fact, the March 15-16 FOMC meeting minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps amid concerns that inflation had broadened through the economy. The minutes also showed general agreement about reducing the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions.
The Fed's aggressive plans, along with fading hopes for a diplomatic solution to end the war in Ukraine, took its toll on the global risk sentiment. This was evident from a generally weaker tone around the equity markets, which further drove some haven flows towards the buck and contributed to keeping a lid on any meaningful upside for the GBP/USD pair.
There isn't any manor market-moving economic data due for release from the UK, suggesting that the USD price dynamics will play a key role in influencing the GBP/USD pair. Later during the early North American session, traders will take cues from the US Weekly Initial Jobless Claims data. This, along with the risk sentiment, would drive the USD demand and provide some impetus.
Technical levels to watch