GBP/USD seesaws above 1.2500 with eyes on UK employment, US Retail Sales and debt ceiling talks
- GBP/USD grinds higher after posting the biggest daily jump in two weeks, bouncing off the lowest levels in fortnight.
- Cautious optimism surrounding US debt ceiling solution allows US Dollar bulls to take a breather.
- UK employment details will be crucial for Pound Sterling buyers after BoE, UK growth numbers came in mixed.
- US Retail Sales for April, President Biden’s debt ceiling negotiations with House Speaker McCarthy eyed too.
GBP/USD portrays a typical pre-data anxiety above 1.2500, following the biggest daily rebound in a fortnight as the key Tuesday begins. That said, the Cable pair managed to cheer hawkish comments from the Bank of England (BoE) Chief Economist, as well as broad US Dollar retreat amid mildly positive sentiment, the previous day. However, traders remain cautious as they approach monthly readings of the UK employment readings, US Retail Sales and the all-important US debt ceiling talks.
“The Bank of England needs to guard against second-round inflationary effects which could see inflation bottom out at 4% or 5%, rather than return to its 2% target, BoE Chief Economist Huw Pill said on Monday,” per Reuters.
On the other hand, the White House announced a meeting between President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy to overcome the looming US default. Ahead of the event, the US policymakers appear somewhat optimistic on extending the debt ceiling limit before the June expiry.
Apart from the risks, the largest fall US NY Empire State Manufacturing Index since April 2020, to -31.8 for May, joined mixed Fed talks to also weigh on the US Dollar. That said, Atlanta Fed President Raphael Bostic told CNBC on Monday that there is still a long distance to go on inflation and added that they may have to "go up on rates," as reported by Reuters. Bostic further noted that he will not be looking at cutting rates until well into 2024 in his baseline scenario. On the contrary, Chicago Federal Reserve Bank President Austan Goolsbee said in an interview with CNBC on Monday that a lot of impact of rate hikes is still in the pipeline. Furthermore, Minneapolis Fed President Neel Kashkari stated that signaled that the Fed has a long way to go to get inflation to 2.0%.
Amid these plays, Wall Street closed with mild gains and the US Treasury bond yields dribbled in a positive territory. That said, the US Dollar Index (DXY) snapped two-day uptrend while retreating from the five-week high.
Technical analysis
Although a one-month-old ascending trend line restricts short-term GBP/USD downside near 1.2450, the Cable buyers need validation from the mid-April peak of around 1.2550 for conviction.