GBP/USD subdued around the figure at 1.1800 posts mixed US data, awaiting Powell’s speech

• GBP/USD fluctuates during the day, with traders waiting for Powell to take the stand on the sidelines.
• US growth in the second quarter improved but remains below the 0% threshold; a US recession looms.
• Money market futures expect the BoE to hike rates 250 bps by May of 2023.

The GBP/USD slightly advanced in the North American session, staying a comeback after piercing below the 1.1800 figure for the fourth time in the week, but a shift in sentiment augmented the appetite for the Sterling. Factors like China’s stimulus to the housing and construction markets underpinned worldwide stocks.

The GBP/USD reached a daily low of around 1.1783 during the Asian session before climbing towards the day’s high at 1.1864. Nevertheless, it retreated towards current exchange rates. At the time of writing, the GBP/USD trades at 1.1817, registering marginal gains of 0.18%.

Before Wall Street opened, the US Department of Commerce reported that the US Gross Domestic Product for Q2 improved, by -0.6%, higher than estimates of -0.8%, and above the advanced reading. At the same time, the Bureau of Labor Statistics (BLS) revealed that Initial Jobless Claims for the week ending on August 20 were lower than foreseen, at 243K from 253K.

Elsewhere, Fed policymakers led by Kansas City Fed Esther George said that the US central bank would hold rates above 4% and wanted to see a full quarter of consistent inflation data to know where things are going.

Earlier, Atlanta’s Fed Raphael Bostic said he’s undecided to go 50 or 75 bps and emphasized that expectations of a Fed pivot are “misguided.” Echoing his comments was Philadelphia’s Fed Patrick Harker, who said that he likes to see the Federal funds rate (FFR) at 3.4%, and then perhaps stay for a while there. He supports a 50 bps increase but wants to see the next inflation report.

Meanwhile, a gloomy economic outlook in the UK, with energy bills pushing higher, Bank of England (BoE) recession projections for at least 18 months, and a slowing economy, would make BoE’s job harder, with inflation levels at double digits. Nevertheless, as shown by STIRs, money market futures expect 250 bps of further hikes by May of 2023, meaning investors expect the Bank’s Rate to hit 4.25%.

What to watch

The US economic calendar will release the Fed’s favorite measure of inflation, July’s PCE, headline, and core figures before Wall Street opens. Later, the US Federal Reserve Chair Jerome Powell will hit the stand.

GBP/USD Price Analysis: Technical outlook

The GBP/USD trades below the midline of a parallel descending channel, pierced earlier in the day but retraced, trading below August’s 24 daily close. Even though the major trades above its opening price, a daily close below 1.1795, would pave the way for a re-test of the YTD lows at around 1.1716. Otherwise, a break above 1.1878, the high of the week, will pave the way towards 1.1900.