GBP/USD struggles to gain any meaningful traction on Monday and oscillates in a range.The GBP/USD pair kicks off the new week on a subdued note and seesaws between tepid gains/minor losses through the early part of the European session. The pair is currently placed around the 1.2400 mark, nearly unchanged for the day, and for now, seems to have stalled its retracement slide from the highest level since June 2022 touched on Friday.
The US Dollar (USD) edges higher for the second successive day and looks to build on the previous day’s recovery move from a one-year low, which, in turn, is seen acting as a headwind for the GBP/USD pair. The University of Michigan’s preliminary report showed that one-year inflation expectations rose to 4.6% from 3.6% in March and fueled speculations that the Federal Reserve (Fed) might continue raising interest rates. In fact, the markets are pricing in a greater chance of another 25 bps lift-off at the next FOMC meeting in May. This remains supportive of elevated US Treasury bond yields and continues to underpin the Greenback.
Investors, however, seem convinced that the US central bank will pause its rate-hiking cycle, sooner rather than later, amid signs of easing inflationary pressures. The expectations were boosted by the US CPI and the PPI report released last week, which indicated that disinflation is progressing smoothly. Moreover, the mostly downbeat US Retail Sales figures on Friday reaffirmed the view that the Fed’s year-long interest rate hiking campaign is cooling domestic demand. This, in turn, is holding back the USD bulls from placing aggressive bets and acting as a tailwind for the GBP/USD pair, warranting some caution for aggressive bearish traders.
In the absence of any relevant market-moving macro data from the UK, traders now look to the US economic docket, featuring the release of the Empire State Manufacturing Index later during the early North American session. Apart from this, the US bond yields, along with the broader risk sentiment, will drive the USD demand and produce short-term trading opportunities around the GBP/USD pair. The focus will then shift to the monthly UK employment details on Tuesday, which should provide some meaningful impetus.
EUR/USD drops toward 1.0900 as USD recovery continues
EUR/USD has extended its downward correction and dropped toward 1.0900. With Wall Street’s main indexes trading mixed on Monday, the US Dollar continues to gather strength in the second half of the day, causing the pair to continue to stretch lower.
GBP/USD loses traction, drops below 1.2400
GBP/USD has lost its recovery momentum and retreated toward 1.2350 in the American session on Monday. The renewed US Dollar strength on growing expectations for another 25 bps Fed rate hike in May weighs on the pair ahead of the UK jobs report on Tuesday.
Gold drops below $1,990 as US yields push higher
Gold price has reversed its direction and dropped below $1,990 after having climbed above $2,010 earlier in the day. Amid heightened expectations for one more Fed rate hike in May, the benchmark 10-year US Treasury bond yield rises toward 3.6%, causing XAU/USD to stay under bearish pressure.
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