GBP/USD picks demand around 1.2200 as risk appetite improves further

• GBP/USD has displayed recovery after correcting to near 1.2200 as a risk-on impulse has strengthened further.
• Fed Harker doesn’t see any recession but GDP could slow to 1% in CY2023.
• UK’s annual Industrial and Manufacturing Production (Nov) are expected to contract by 3.0% and 4.8% respectively.

The GBP/USD pair has rebounded after a corrective move to near the round-level support at 1.2200 in the early Toyo session. The Cable has resumed its upside journey as the risk appetite of the market participants has improved further.

After three consecutive bullish trading sessions, the S&P500 futures are extending gains, portraying a cheerful market mood. Also the demand for US government bonds has improved as 10-year US Treasury yields have eased further to near 3.44%. The US Dollar Index (DXY) has turned sideways after refreshing its seven-week low at 101.68.

Investors dumped the USD Index after further softening of the United States inflation, released on Thursday. The annual headline US Consumer Price Index (CPI) dropped to % while the core CPI that excludes oil and food prices was trimmed to 5.7%, in line with expectations. A spree of inflation softening indicates that the long-term blueprint designed by the Federal Reserve (Fed) chair Jerome Powell and his teammates for achieving price stability is in the right direction.

No doubt, Fed policymakers have started considering further deceleration in the pace of the interest rate hike already after slowing in December’s monetary policy meeting. Philadelphia Fed Bank President Patrick Harker said on Thursday that it was time for future Fed rate hikes to shift to 25 basis points (bps) increments, as reported by Reuters. He further added that recession is not in the picture but the Gross Domestic Product (GDP) could slow to 1% this year.

On the United Kingdom front, investors are awaiting the release of the economic activities-related data, which will result in a power-pack action in the Pound Sterling. Annual Industrial and Manufacturing Production (Nov) are expected to contract by 3.0% and 4.8% respectively.