GBP/USD fades spike to 1.3118 as T-yields remain resilient

A weaker-than-expected US employment cost index and the core PCE numbers hasn’t had a material impact on the treasuries, leaving the spread/difference between the 10-year Treasury yield and the 2-year Treasury yield largely unchanged around 95 basis points. 

Consequently, the knee jerk spike in the GBP/USD pair to 1.3118 has been reversed. The spot currently trades around the 1-hour 50-MA level of 1.3094. 

The downward revision of the Q1 core PCE from 2% to 1.8% and the weaker than expected Q2 core PCE (0.7% vs. 0.9%) coupled with a dismal employment cost index weighed over the US dollar. However, the personal spending component of the Q2 GDP matched estimates of 2.8%. Furthermore, the previous print was revised higher to 1.9% from 1.1%. 

The upbeat consumption figures kept the treasury yields largely unchanged. Thus, Cable backed off from the session high of 1.3118. The focus now shifts to Michigan Consumer Sentiment Index for July and Fed’s Kashkari speech. 

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, “the 4 hours chart shows that the pair is finding short term buying interest around a bullish 20 SMA, whilst technical indicators hold flat above their mid-lines, lacking enough strength to back an upward extension.  Anyway, the upside is favored amid broad dollar's weakness, with gains beyond 1.3100 pointing to a retest of the yearly high around 1.3160, en route to 1.3200.  Below 1.3067, the daily low, the risk turns towards the downside, with scope then to extend its slide down to the 1.3000/20 price zone.”