GBP/USD bounces off weekly lows and climbs towards 1.2170s on a soft US dollar

• The greenback makes a U-turn and begins to weaken; after the London Fix, the pound recovers.
• Stagflation fears keep investors’ flows going through safe-haven assets, except the US dollar.
• GBP/USD Price Forecast: Range-bound, but a break above 1.2212 might open the door for further upside; otherwise, a re-test of YTD lows is on the cards.

The British pound recovered from two-week lows and is advancing just above 1.2150, after sliding below the 1.2000 mark, for the first time since mid-June, when the GBP/USD collapsed towards 1.1933 YTD lows. At 1.2176, the GBP/USD records solid gains, as the year’s first half is near to end.

Half/quarter/month-end flows finished; consequently, the buck drops

The market mood remains negative, though it was not an excuse for the pound to recover some ground. US equities are tumbling, and US Treasury yields followed suit, boosting the GBP/USD upside. In the meantime, the US Dollar Index, a measure of the greenback’s performance vs. six peers, after reaching a weekly high at around 105.541, dives 0.34%, sitting at 104.736, undermined by the fall in US bond yields.

Worries about a global recession and stagnation scenario keep investors on their toes. On Thursday, US inflation showed some signs of slowing down, as the US Bureau of Economic Analysis reported. The US Personal Consumption Expenditure (PCE) Index for May, rose 6.3% YoY, lower than expected. The so-called core PCE, the Fed’s preferred gauge of inflation, downtick from 4.8% YoY foreseen to 4.7%.

At the same time, the US Department of Labour released the Initial Jobless Claims for the week ending on June 25, which topped above the 228K expected, and rose by 231K.

In the meantime, the Federal Reserve chair Jerome Powell crossed wires. He said policymakers’ job is to find price stability, even during the new forces of inflation, while adding that the US economy is solid and can withstand monetary policy adjustments.

In the same event hosted by the ECB, the Bank of England Governor Andrew said the pound was “one of the many influences on inflation” and added that he was not surprised by its recent weakness. Bailey acknowledged that the UK’s economy is weakening sooner and somewhat more than other counterparties.

The UK economic calendar will feature June’s S&P Global/CIPS Manufacturing PMI readings in the week ahead. Across the pond, the US docket will reveal S&P Global Manufacturing PMIs alongside the ISM Manufacturing PMI.

GBP/USD Price Forecast: Technical outlook

From a technical perspective, the GBP/USD is still downward biased, but sellers unable to re-test the YTD lows, near 1.1933, has opened the door for further gains. If the GBP/USD breaks above the June 29 high at 1.2212, that will pave the way for a rally to the 20-day EMA at 1.2293. Otherwise, the major will consolidate until GBP sellers can drag the pound towards the YTD lows near the 1.1930s.