GBP/USD erases daily losses and returns to the 1.1600 resistance area

• The pound reverses its previous downtrend and returns to the 1.1600 area.
• Rumors of Fed pivoting are keeping USD bulls on a leash.
• GBP/USD remains firm, likely to retest 1.1760 – UOB.

The pound bounced up right above 1.1500 earlier on Friday to regain lost ground during the European and US trading sessions and reach the 1.1600 resistance area. In a bigger picture, the pair remains trading in a range for the second consecutive day, consolidating gains after a two-day rally from levels below 1.1300 earlier this week.

Expectations of a softer Fed stance are weighing on USD bulls

Market expectations that the Federal Reserve might start softening its monetary tightening pace over the next months are keeping USD bulls in check.

Investors have already priced in a 0.75% hike in December, but the increasing rumors about the possibility of scaling down monetary tightening in December are curbing demand for the dollar.

Beyond that, the myriad of US macroeconomic data released on Friday has failed to provide a clear direction for the USD.

US personal spending has grown beyond expectations in September (0.6% against the consensus 0.4%) confirming that Americans have continued shopping, despite the soaring inflation, which maintains the US economy in good shape and clears the Fed’s path for another aggressive hike in December.

On the other hand, wage growth slowed down in the third quarter, according to data from the Labor Department, which suggests that inflation might have peaked or is close to doing so.

Furthermore, the US Personal Consumption Expenditures remained flat at a 6.2% yearly pace in September, while the Core PCE, the Fed’s preferred inflation gauge increased below expectations.

GBP/USD might appreciate to test 1.1760 resistance – UOB

FX analysts at UOB see the pair on a firm tone, and likely to test the 1.1760 area over the next weeks: Our expectation for GBP to ‘rise further’ yesterday did not materialize as it traded between 1.1550 and 1.1645 (…) “Yesterday (27 Oct, spot at 1.1630), we held the view that GBP is still strong and is likely to strengthen further. We indicated that the next level to monitor is at 1.1760.”

Technical levels to watch