GBP/USD struggles around 1.2080, upward remain favored on positive market sentiment

In the Tokyo session, the GBP/USD pair is showing symptoms of losing its upward momentum while attempting to surpass the immediate hurdle of 1.2080. The upside momentum is not entirely depleted, as the risk profile is optimistic. Continuous movement of the Cable above the psychological resistance of 1.2000 shows that bulls are in their comfort zone and that more gains are still anticipated.

In the meantime, the US dollar index (DXY) is poised to test the round-level support of 106.00 as the demand for safe-haven assets plummets. As the likelihood of a continuation of the Federal Reserve's (Fed) 75 basis point (bps) rate hike framework diminishes, the US Dollar could touch a three-month low at 105.34 due to its declining negative momentum.

The yields on 10-year US Treasuries have fallen below 3.69 percent as a majority of Fed policymakers prefer a slower rate of interest rate increases. The minutes of the Federal Open Market Committee (FOMC) made it plain that Fed think tanks will likely track the progress of attempts to achieve price stability. Currently, a reduction in financial risks is also essential.

On the United Kingdom front, the Bank of England (BOE) increased interest rates by 75 basis points in its November monetary policy. A Reuters poll conducted from November 18-22 predicts that BOE Governor Andrew Bailey would increase interest rates by 50 basis points.

As reported by The Guardian, BOE Chief Economist Huw Pill stated that a surge in people leaving the British workforce due to ill health or early retirement could force the BOE to increase interest rates further. He added, "Accelerating unemployment among the working-age population indicates a negative supply shock, which could result in higher payroll costs for employers and consequently a rise in inflation."