- GBP/USD is defending the 1.2100 level and preventing its intraday pullback from a one-month low.
- A technical crunch in the US forces the dollar to cut some of its gains and provides some support.
- Britain’s political uncertainty about Brexit warrants some caution before making aggressive bullish bets.
couple GBP/USD It finds some support near 1.2100 and halts its intraday pullback from the 1.2200 area, or hit a nearly one-month high earlier this Thursday. The pair recovered a few pips during the opening US session after the US GDP flash report was released.
The world’s largest economy contracted at an annual rate of 0.9% during the April-June period, according to the first estimate released by the US Bureau of Economic Analysis. The reading is worse than the 0.4% growth estimate and confirms a technical slowdown after a 1.6% contraction in the previous quarter. The US dollar cuts off some of the gains from the intraday rally, which in turn helps the GBP/USD pair to bounce back towards the 1.2150 area.
The data, however, added to growing market concerns about a global economic slowdown and continues to sway investor sentiment. This is evidenced by a generally weak tone around US equity futures, which, coupled with a rally in US Treasury yields, could support the Haven dollar. Therefore, it would be wise to wait for the strength to hold above 1.2200 before positioning for any GBP/USD price move.
On the other hand, the downward trend is likely to subside, at least for the time being, in view of the Bank of England increasing bets on a 50 basis point rate hike in its next 2020 monetary policy meeting in August. The mixed environment amid UK political uncertainty and the Brexit crisis offers some caution for aggressive traders.