GBP/USD probes bulls after three-day uptrend as UK GDP, US inflation cues loom

• GBP/USD remains sidelined after reversing from weekly top, prints mild losses to defy three-day winning streak.
• Cautious mood ahead of key US data, recession woes and BoE talks weigh on Cable pair.
• Downbeat Fedspeak, softer US data allow GBP/USD to grind higher.
• Preliminary readings of UK Q4 GDP, US consumer-centric data for January eyed for clear directions.

GBP/USD pares weekly gains around 1.2100 as it portrays the Cable traders’ anxiety ahead of the key UK and the US data amid early Friday. In doing so, the quote struggles to justify the Federal Reserve’s (Fed) hawkish bias, as well as recession woe.

That said, the market’s fears of economic slowdown join the downbeat catalysts surrounding the UK economy, as well as the Bank of England (BoE) policymakers’ inability to convince markets of their hawkish bias to weigh on GBP/USD prices.

A negative difference between the US 10-year and 2-year Treasury bond yields triggered the recession woes the previous day and weighed on the GBP/USD prices, after the quote renewed weekly top. That said, US Treasury bond yields grind higher following the widest yield curve inversion imprint since 1980. It’s worth noting that both these key bond yields remain mostly inactive around 3.66% and 4.50% respectively by the press time.

On Thursday, Bank of England (BoE) Chief Economist Huw Pill and policymaker Jonathan Haskel testified before the UK Treasury Select Committee alongside Governor Andrew Bailey. Among them, BoE Governor Bailey stated, “We expect inflation to come down rapidly this year.” That said, Chief Economist Huw Pill mentioned that there is substantial further monetary policy tightening still to come through as a result of lags in policy transmission. On the same line, BoE policymaker Jonathan Haskel said that he sees considerable upside risks to the inflation forecast and added that the uncertainty around inflation should be met with forceful policy action.

Elsewhere, the downbeat prints of the US Weekly Initial Jobless Claims and comments from Richmond Federal Reserve (Fed) President Thomas Barkin seemed to have weighed on the US Dollar during the initial Thursday, before the recession woes triggered the USD rebound.

That said, Fed’s Barkin appeared too dovish while suggesting rate cuts as he said that it would make sense for the Fed to steer "more deliberately" from here due to lagged effects of policy. Previously, Fed Chair Jerome Powell hesitated in cheering the upbeat US jobs report and raised fears of no more hawkish moves from the US central bank.

The US Weekly Initial Jobless Claims rose to 196K versus 190K expected and 183K prior. “The advance number for seasonally adjusted insured unemployment during the week ending January 28 was 1,688,000, an increase of 38,000 from the previous week's revised level," said the US Department of Labor (DOL) showed on Thursday.

Against this backdrop, S&P 500 Futures struggle for clear directions while the US Treasury bond yields remain mostly unchanged.

Moving on, preliminary readings of the UK’s fourth quarter (Q4) Gross Domestic Product (GDP), expected 0.0% QoQ versus -0.3% prior, will be crucial for the GBP/USD pair traders to watch amid recession woes. Following that, the early signals for the next week’s US inflation data, namely preliminary readings of the United States consumer-centric numbers for February like the Michigan Consumer Sentiment Index and 5-year Consumer Inflation Expectations will be crucial for clear directions. Considering the upbeat forecasts for China and the US data, the GBP/USD pair is likely to remain pressured unless witnessing any surprises.

Also read: UK GDP Preview: Growth to stagnate but recession narrowly averted

Technical analysis

GBP/USD looks for clear directions as it retreats from the 50-DMA hurdle, around 1.2190 at the latest, inside a three-month-old bullish triangle formation.