GBP/USD gains traction for the second straight day and climbs to a nearly two-week high.A positive risk tone, subdued US bond yields weigh on the USD and remain supportive.
The disappointing UK macro data adds to recession fears and might cap any further gains.
The GBP/USD pair catches fresh bids near the 1.1600 mark on Monday and climbs to a near two-week high during the first half of the European session. The pair is currently trading around the 1.1700 round figure and is looking to build on its recent bounce from the lowest level since 1985 touched last week.
The US dollar prolongs its sharp retracement slide from a two-decade high and remains under intense selling pressure on the first day of a new week. In fact, the USD Index, which measures the greenback’s performance against a basket of currencies, dives to a fresh monthly low. This turns out to be a key factor pushing the GBP/USD pair higher for the second successive day.
Given that the markets have already priced in a supersized 75 bps rate hike at the next FOMC meeting on September 20-21, a generally positive tone around the equity markets is seen weighing on the safe-haven greenback. Apart from this, the ongoing USD corrective decline lacks any obvious fundamental catalyst and is more likely to remain limited amid elevated US Treasury bond yields.
Furthermore, the worsening outlook for the UK economy might further contribute to keeping a lid on any further gains for the GBP/USD pair. The worries were further fueled by the mostly disappointing UK macro data released earlier this Monday. The UK Office for National Statistics reported that the economy expanded by 0.2% in July, less than consensus estimates for a 0.5% growth.
Separately, the UK Manufacturing and total Industrial Production fell short of expectations, arriving at 0.1% MoM in July and -0.3%, respectively. This warrants caution before positioning for any further gains. Nevertheless, the GBP/USD pair has now rallied nearly 300 pips from the 1.1400 neighbourhood, or a 35-year low set last Wednesday and remains at the mercy of the USD price dynamics.
EUR/USD retreats from 1.0200 as US dollar correction stalls
EUR/USD is pulling back from the 1.0200 level in the European trading hours, as the US dollar bears take a breather despite the risk-on sentiment. Hawkish ECB signals keep EUR bulls supported.
GBP/USD turns south towards 1.1650 amid disappointing UK data, risk flows
GBP/USD is dropping towards 1.1650, having faced rejection at 1.1700. Investors assess the downbeat UK GDP and industrial data amid growing recession risks. The US dollar pauses its correction, as the focus shifts to inflation data. A 75 bps Sept Fed rate hike appears fully priced in.
Gold jumps closer to Friday’s swing high amid notable USD supply
Gold attracts some dip-buying near the $1,712 area on Monday and turns positive for the second straight day. The XAU/USD refreshes its daily high, around the $1,726-$1,727, and moves back closer to a one-and-half-week high touched on Friday.