GBP/USD witnessed some selling on Friday amid the emergence of fresh USD buying.
The GBP/USD pair struggled to capitalize on the overnight bounce from sub-1.1900 levels, or a multi-day low and attracted fresh selling on the last day of the week. The pair, however, managed to rebound a few pips from the daily low and was last seen trading with only modest losses, just above mid-1.1900s heading into the North American session.
The recent optimistic move in the equity markets seems to have run out of steam amid growing fears about a possible global recession. The worries were further fueled by the disappointing release of the flash Eurozone PMI prints, which continued weighing on investors’ sentiment. The cautious mood assisted the safe-haven US dollar to regain positive traction, which, in turn, was seen as a key factor that exerted downward pressure on the GBP/USD pair.
The British pound was further undermined by rather unimpressive UK Retail Sales data, which edged down by 0.1% in June. The fall, however, was smaller than the 0.3% anticipated, which, along with slightly better-than-expected flash UK PMIs offered some support to sterling. Apart from this, the rising possibility of a 50 bps rate hike by the Bank of England in August assisted the GBP/USD pair to find some support near the 1.1915 region.
It is worth recalling that BoE Governor Andrew Bailey said earlier this week that the central bank has an absolute priority to bring inflation back down to its 2% target. Bailey clearly stated that a 50 bps increase will be among the choices on the table at the next meeting. This makes it prudent to wait for strong follow-through selling before confirming that the GBP/USD pair’s recent bounce from the 1.1760 region has run its course.
Market participants now look forward to the US economic docket, featuring the release of the flash PMI prints for July. This, along with the broader market risk sentiment, would influence the USD price dynamics and provide some impetus to the GBP/USD pair. Nevertheless, spot prices remain on track to post modest weekly gains and snap a three-week losing streak, though the UK political and Brexit woes might continue to act as a headwind.
EURUSD has extended its recovery and reclaimed 1.0200 in the American session on Friday. After the data from the US pointed to a contraction in the private sectors business activity in early July, the dollar came under renewed selling pressure.
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