English
GBP/USD holds steady around 1.2500 mark advance of UK employment details
The GBP/USD exchange rate moves marginally lower during the Asian session, but there is no follow-through selling. The USD halts its retracement decline from a multi-month high, weakening the pair. Now, traders turn to the monthly employment data for the United Kingdom for meaningful impetus.
During Tuesday's Asian session, the GBP/USD pair extends Monday's late retracement from the vicinity of mid-1.2500s and ticks lower. Spot prices are currently trading near the psychological level of 1.2500 and remain within striking distance of a three-month low reached last week.
The US Dollar (USD) receives some dip-buying and reverses a portion of its abrupt overnight decline, halting its retracement slide from the highest level since March, which is anticipated to weigh on the GBP/USD pair. Growing consensus that the Federal Reserve (Fed) will maintain higher interest rates for an extended period of time, coupled with the prevalent cautious market sentiment, appears to benefit the safe-haven Greenback.
Notably, the markets have been pricing in the possibility of one more 25-bps rate hike by the Fed by the end of the year. The bets were reaffirmed by the optimistic macroeconomic data published by the United States last week, which indicated a robust economy. Moreover, The Wall Street Journal reported over the weekend that some officials still prefer to err on the side of raising rates too much, reasoning that they can reduce them later.
The hawkish outlook continues to support elevated US Treasury bond yields and fuel concerns about economic headwinds caused by swiftly rising borrowing costs. In turn, this dampens investors' appetite for speculative assets and drives some safe-haven flows into the dollar. However, Bank of England (BoE) policymaker Catherine Mann's hawkish comments on Monday could limit the downside for the GBP/USD pair.
Mann opined that it was too early for the BoE to stop raising interest rates and that it was preferable for the central bank to err on the side of raising rates too high rather than ceasing too soon. This follows BoE Governor Andrew Bailey's warning last week that financing costs may continue to rise due to persistently high inflation. However, Bailey informed legislators that the BoE is much closer to ending its string of rate hikes.
The mixed fundamental backdrop may discourage traders from placing aggressive directional wagers on the GBP/USD pair ahead of the US employment report, which is scheduled for release later in the early European session. The focus will then transition to the monthly UK GDP report on Wednesday, which will be followed by the release of the crucial US consumer inflation numbers, which will provide significant impetus to the major.
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