GBPUSD clings to gains near daily high amid broad-based USD weakness, NFP awaited

• GBPUSD gains some positive traction on Friday and reverses a part of the overnight losses.
• A positive risk tone is seen weighing on the safe-haven USD and lending support to the pair.
• The BoE’s gloomy outlook for the UK economy could act as a headwind for the British Pound.
• A more hawkish stance by the Fed to limit the USD losses and cap the pair ahead of the NFP.

The GBPUSD pair stages a goodish recovery from a two-week low, around the 1.1150 area touched earlier this Friday and maintains its bid tone through the first half of the European session. Currently placed just below mid-1.1200s, the pair, for now, seems to have stalled its recent pullback from a multi-week high amid a modest US Dollar weakness.

A generally positive tone around the equity markets turns out to be a key factor exerting some downward pressure on the safe-haven greenback. That said, elevated US Treasury bond yields, bolstered by the prospects for a further policy tightening by the Federal Reserve, should help limit the downside for the USD. In fact, Fed Chair Jerome Powell downplayed expectations for a dovish pivot and said on Wednesday that it was premature to discuss a pause in the rate-hiking cycle.

Apart from this, the Bank of England's gloomy outlook for the UK economy should act as a headwind for the British Pound and contribute to capping the GBPUSD pair. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024. The BoE on Thursday also indicated a lower terminal peak than is currently priced into markets. This, in turn, warrants some caution for aggressive bullish traders ahead of the release of the US NFP report.

The closely-watched US monthly employment data is expected to show that the economy added 200K new positions in October and the jobless rate edged higher to 3.6% from 3.5% previous. The key US macro release, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and produce some meaningful trading opportunities around the GBPUSD pair.

Technical levels to watch