GBP/USD sellers remain unconvinced below 1.1600, US PCE inflation eyed
- GBP/USD stalls the previous day’s pullback from six-week high.
- DXY rebounds on strong US GDP, ignored downbeat yields.
- Fading UK’s political optimism adds strength to the pullback move.
- Fed’s preferred inflation gauge will be eyed ahead of next week’s FOMC.
GBP/USD struggles to defend bears while making rounds to 1.1570 Friday’s Asian session, after welcoming them from a monthly top the previous day.
The US dollar’s broad recovery joined an absence of upbeat British headlines to recall the pair sellers. However, the cautious mood ahead of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for September, seems to restrict the quote’s latest moves.
On Thursday, the US Dollar Index (DXY) recovered from a five-week low after the Gross Domestic Product (GDP) rose 2.6% on an annualized basis, more than expected, in the third quarter (Q3). It should also be noted, however, that the details suggesting a fifth consecutive fall in private consumption challenged the Fed hawks as it showed the policymakers are gradually nearing the target of slowing down private domestic demand, which in turn might favor the easy rate hike talks for December in the next week’s Federal Open Market Committee (FOMC) meeting.
Elsewhere, the newly formed British government is up for tax increases and spending cuts to fetch the UK economy from the recession woes. Even so, the doubts about the measures’ capability to revive the struggling economy and the Bank of England’s (BOE) likely easy stand, now that Rishi Sunak is Prime Minister, might also have favored the GBP/USD bears of late.
It’s worth noting that the US 10-year Treasury yields dropped to a two-week low on Thursday and are bracing for the first weekly loss in 11 amid receding hawkish Fed bets. The same allowed equities to have a nice week despite the latest weakness in numbers.
Moving on, the Core PCE Price Index for September, expected to rise to 5.2% versus 4.9% prior, will be crucial for the GBP/USD pair traders as a firmer print could add strength to the yields and hawkish Fed bets, which in turn will be favorable for the bulls.
Technical analysis
Despite the latest pullback, GBP/USD buyers remain hopeful unless the quote stays beyond the 1.1380-75 support confluence including the 50-DMA and an upward-sloping trend line from September 28.