GBP/USD Pair Climbs to 1.2635, Supported by Less Hawkish Fed Outlook and BoE Rate Hike Bets

The GBP/USD pair continued its ascent for the third day in a row on Friday, reaching its highest level since May 2022, around 1.2635. Although it gave up some of its intraday gains and was trading at around 1.2600 during the first half of the European session, it was still up by more than 0.20% for the day.

The US Dollar (USD) struggled to gain ground on the last day of the week, despite a modest overnight rebound from a one-week low. The less hawkish outlook of the Federal Reserve (Fed) and a modest recovery in global risk sentiment, as indicated by a generally positive risk tone, were seen as key factors pushing the GBP/USD pair higher. 

The safe-haven Greenback was undermined by the Fed’s more stringent and data-driven approach to raising rates further, as well as fears of a potential US banking crisis and debt ceiling issues.

In contrast, the British Pound continued to be supported by rising bets for an additional 25 basis points rate hike by the Bank of England (BoE) in May, which in turn, added to the momentum of the GBP/USD pair. 

However, a further recovery in US Treasury bond yields acted as a tailwind for the USD and limited gains for the pair.

Traders remained cautious and awaited the release of the highly anticipated US monthly employment data, popularly known as the NFP report, which was due later during the early North American session. 

The report is expected to play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. 

Despite this, the pair is on track to register modest gains for the third successive week, supported by a favourable fundamental backdrop that favours the bulls and supports prospects for a further appreciation.

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