On Thursday, the GBP/USD pair experienced some dip-buying near the 1.2435 regions and has temporarily halted this week’s modest pullback from its highest level since June 2022. 

Spot prices climbed by almost 50 pips from the daily low, but lacked follow-through and traded in the neutral territory around the 1.2465 zone during the early part of the European session.

The US Dollar (USD) struggled to capitalize on the overnight bounce from over a two-month low and attracted fresh sellers on Wednesday. This, in turn, is seen as lending some support to the GBP/USD pair. 

The bets for an imminent pause in the Federal Reserve’s (Fed) rate-hiking cycle have increased, which is acting as a headwind for the Greenback. The current market pricing indicates an even chance of a 25 bps lift-off at the next FOMC meeting in May and the possibility of rate cuts by year-end.

The disappointing release of the US ADP report on Wednesday further reaffirmed these bets. It showed that private-sector employers added 145K jobs in March, compared to the anticipated 200K and the previous month’s upwardly revised reading of 261K. 

Additionally, the ISM Services PMI indicated a slowdown in growth during March, along with a deceleration in its Employment sub-index. The data suggested that the Fed’s efforts to cool the labor market could be having some impact.

Meanwhile, expectations that the Fed is nearly done with its inflation-fighting interest rate hikes have kept the US Treasury bond yields depressed near their lowest level in seven months. This, along with a stable performance around the equity markets, undermines traditional safe-haven assets, including the buck. 

The GBP/USD pair, however, fails to attract any meaningful buying and lacks bullish conviction amid mixed signals from the Bank of England (BoE) policymakers over the future rate-hike path.

Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of the release of the closely-watched US monthly jobs data – popularly known as NFP – on Friday. In the meantime, traders on Thursday will take cues from the UK Construction PMI and the US Weekly Initial Jobless claims data. 

This, along with the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.


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