**GBP/USD Edges Lower as Markets Eye US Data, BoE Commentary**
*By Barani Krishnan / Mitrade*
The British pound slipped on Thursday, pressured by a robust greenback amid ongoing uncertainty surrounding the US economic outlook and fresh commentary from the Bank of England (BoE). While the Federal Reserve continues to project a cautious message regarding the timeline for its first rate cut, the pound trade also remains sensitive to developments from Threadneedle Street.
This article provides a comprehensive analysis of the GBP/USD exchange rate action, the driving macroeconomic factors, key levels traders are watching, and what investors should look out for in Friday’s session.
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### GBP/USD Price Action: Sterling Softens But Finds Support
Sterling edged lower against the dollar on Thursday, slipping toward the 1.2680 area as dollar bulls regained momentum. The major currency pair came under pressure during the Asian session and remained on the defensive in early European trade.
– GBP/USD retreated from highs printed above 1.2700, with intraday momentum remaining subdued.
– However, buyers were active around nearby support levels, limiting the day’s downside despite dollar strength.
– Recent price action has shown the pair trapped within a moderately narrowing range, reflecting broader market indecision over central bank policy divergence.
Technical analysts highlight the following as key reference points:
– Immediate support is seen near 1.2660, the region where buyers have previously stepped in.
– Resistance stands at 1.2720, a barrier difficult to breach absent new bullish catalysts.
– Broader support below sits at 1.2620, where a break could trigger steeper losses.
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### The Dollar Narrative: Sticky US Inflation and Fed Policy
The main underpinning of sterling’s slide has been the persistent strength in the US dollar, which continues to benefit from elevated Treasury yields and sticky US inflation data. Several key factors have come into play:
– Markets were spooked after the latest Federal Reserve meeting, which reaffirmed policymakers’ reluctance to cut rates prematurely, emphasizing the need for greater confidence that inflation is moving back to the 2 percent target.
– US economic indicators, particularly retail sales and jobs numbers, have shown resilience, suggesting rate cuts may come later than previously anticipated.
– Rate futures show the probability of a September Fed cut has diminished, further bolstering the dollar’s appeal against other majors.
As a result:
– The US Dollar Index (DXY) remained anchored above the 105.50 mark, reflecting continued investor appetite for dollar-denominated assets.
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### UK Data and BoE: Cautious Optimism, But Sticky Services Inflation Persists
On the domestic front, UK macroeconomic news has painted a mixed picture, offering limited support for sterling bulls.
– This week’s UK inflation numbers showed headline CPI continuing to moderate, but services inflation, considered a stickier component, remained stubbornly high.
– While headline inflation fell in line with expectations, the services measure printed above 6 percent, fueling concerns among policymakers about underlying price pressures.
The BoE’s stance was reflected in recent commentary:
– Several Monetary Policy Committee (MPC) members reiterated a cautious approach to loosening policy, warning of persistent wage pressures and continued price stickiness in the services sector.
– Wednesday’s CPI data prompted money markets to modestly scale back bets for a June BoE cut, although a reduction by August is still broadly priced in.
Mitrade’s Barani Krishnan notes that while optimism has gradually returned to the UK economy, the BoE remains vigilant:
– Policymakers are balancing stronger GDP prints against risks from a robust labor market and sticky core inflation.
– Recent data releases are seen as reducing near-term downside risk for sterling, but do not signal a green light for rapid rate cuts.
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### Market Reactions: Flows Still Favor Dollar Bulls
Investor appetite for the dollar remains strong as risk sentiment is suppressed by hawkish rhetoric from Fed speakers and mixed signals from global
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