GBP/USD falls below 1.2900 in anticipation of the UK GDP and the US Michigan Consumer Sentiment Index
GBP/USD extends yesterday's losses near a daily low that has been modestly offered recently. Contrary to recent lower US inflation figures, hawkish Fedspeak bolsters the US dollar following a five-day decline. Uncertainty surrounding UK politics and Brexit, together with the BOE's pessimistic outlook, discourages purchasers. The preliminary measurement of the UK's GDP for the second quarter is likely to exacerbate recession concerns and impact on cable prices.

GBP/USD refreshes intraday low around 1.2180, falling for the second consecutive day, as the US dollar pares weekly losses during Friday's Asian session. In addition to the dollar's stabilization of recent losses near the monthly low, the Cable pair trader's cautious disposition ahead of the early estimates of the UK's second-quarter Gross Domestic Product (GDP) also weighs on the quotation.
Even if the US Dollar Index (DXY) fell for a fifth consecutive day on Thursday, the pre-data nervousness appears to be strong enough to recall GBP/USD bearish. The cause may be related to the political and Brexit-related pessimism surrounding the United Kingdom.
The UK government met with energy executives on Thursday to discuss high bills, but Prime Minister Boris Johnson told Sky News that his successor will "make substantial budgetary decisions." According to the UK Express, a Conservative analyst has asserted that the United States has gained favor with Brexit Britain due to its lack of ties to the European Union (EU).
In contrast, the US Producer Price Index (PPI) for July tracked the headline Consumer Price Index (CPI) while decelerating to 9.8% YoY compared to 11.3% before and 10.0% market expectations. In spite of this, the monthly PPI plummeted to its lowest level since May 2020, at -0.5% compared to 1.0% projected and 0.2% previously, indicating a further reduction in inflationary concerns.
In addition, the weaker readings of the US Weekly Jobless Claims indicated an improvement in the US employment landscape, mirroring the recent employment data from the world's largest economy, which in turn contributed to the risk-on sentiment but was unable to benefit GBP/USD. Nevertheless, US Initial Jobless Claims decreased to 262K for the week ending August 6 compared to the 263K anticipated and the 248K previously reported.
Recently, Mary Daly, president and chief executive officer of the Federal Reserve Bank of San Francisco, stated that she is open to a September rate increase of 75 basis points. Previously, the presidents of the Federal Reserve Banks of Minneapolis and Chicago, Neel Kashkari and Charles Evans, sounded pessimistic. However, Kashkari of the Federal Reserve stated that he has not "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by the end of the year and 4.4% by the end of 2023. In addition, Fed official Evens noted, "The economy is almost certainly a bit more fragile, but it would take something negative to cause a recession." Evans also described inflation as "unacceptably high."
Wall Street began the day on a bullish note before concluding with a mixed performance, while 10-year Treasury rates rose 10 basis points (bps) to 2.88 percent at the latest. Noteworthy is the fact that S&P 500 Futures post modest gains around 4,215 and that US Treasury rates continue to rise as of press time.
In conclusion, GBP/USD bears are poised for continued dominance ahead of the important UK GDP data, which is anticipated to be -0.2% QoQ versus 0.8% previously, mostly because to the Bank of England's (BOE) economic transition concerns. Despite the fact that the markets are all pessimistic, any positive surprise will not be taken lightly due to the recent depreciation of the US currency and diminishing inflation fears.
The initial impressions of the US Michigan Consumer Sentiment Index (CSI) for August, which is anticipated to be 52.5 versus 51.5 before, will be crucial for determining clear orientations after the UK data.
GBP/USD extends decline from a1 11-week-old downward sloping resistance line, around 1.2245 as of press time, in the direction of revisiting the 21-DMA support near 1.2090. However, additional weakness in the cable pair is contingent on a clear breach below the prior resistance line from mid-June, around 1.1940 at the latest.
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