GBP/USD eases from multi-week top, still well bid around mid-1.1500s amid weaker USD
- A combination of factors lifts GBP/USD to a fresh six-week high on Wednesday.
- New UK PM pledges to fix his predecessor's policy errors and underpins sterling.
- Reduced bets for more aggressive Fed rate hikes continue to weigh on the USD.
- A softer risk tone helps limit losses for the safe-haven buck and caps the major.
The GBP/USD pair retreats a few pips from a six-week high touched earlier this Wednesday and is trading around mid-1.1500s during the early North American session.
The new British Prime Minister Rishi Sunak pledges to fix mistakes by the Truss administration and boosts investors' confidence. This leads to a further decline in the UK government borrowing costs and continues to underpin the British pound. Apart from this, the heavily offered tone surrounding the US dollar pushes the GBP/USD pair higher for the second successive day.
Investors scaled back their expectations for a more aggressive policy tightening by the Fed in reaction to the incoming US macro data, which pointed to a slowdown in the world's largest economy. This is evident from the ongoing downfall in the US Treasury bond yields, which drags the USD to its lowest level since September 20 during the mid-European session on Wednesday.
That said, a softer risk tone, as depicted by a generally negative sentiment around the equity markets, offers some support to the safe-haven buck and keeps a lid on any further gains for the GBP/USD pair. Investors also seem reluctant and might prefer to move to the sidelines ahead of the important US economic releases, including the Advance Q3 GDP report, on Thursday.
From a technical perspective, a convincing break through the 1.1475-1.1480 supply zone and a subsequent strength beyond the 1.1500 psychological mark favours bullish traders. Hence, any meaningful pullback could now be seen as a buying opportunity and is more likely to remain limited near the said resistance breakpoint, now turned support.
Next on tap is the release of the New Home Sales data from the US. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and provide some impetus to the GBP/USD pair.
Technical levels to watch