GBP/USD sticks to modest gains above 1.2000, focus remains glued to US PCE Price Index

• GBP/USD edges higher on Friday and snaps a two-day losing streak, though lacks follow-through.
• Bets for additional rate hikes by the BoE lend support to the British Pound and act as a tailwind.
• Sustained USD buying keeps a lid on any further gains ahead of the US Core PCE Price Index.

The GBP/USD pair attracts some buyers near the 1.2000 psychological mark on Friday and reverses a part of the previous day's slide back closer to the weekly low. The uptick, however, lacks follow-through and spot prices remain below the 1.2050 region through the first half of the European session amid the prevalent bullish sentiment surrounding the US Dollar.

In fact, the USD Index, which tracks the Greenback against a basket of currencies, stands tall near a multi-week high amid the prospects for further policy tightening by the Fed. The bets were reaffirmed by the FOMC minutes released on Wednesday, which showed that officials were determined to continue lifting interest rates to fully gain control over inflation. Moreover, the incoming upbeat US macro data pointed to an economy that remains resilient despite rising borrowing costs and should allow the US central bank to stick to its hawkish stance.

The expectations remain supportive of elevated US Treasury bond yields and continue to underpin the buck. Apart from this, a softer risk tone - amid looming recession risks and geopolitical tensions - is seen as another factor benefitting the safe-haven Greenback and caps the upside for the GBP/USD pair. That said, rising bets for additional rate hikes by the Bank of England (BoE) lend some support to the British Pound and act as a tailwind for the major.

Traders also seem reluctant and now seem to have moved to the sidelines ahead of the release of the US Core PCE Price Index - the Fed's preferred inflation gauge. The crucial data will influence market expectations about the Fed's future rate-hike path. This, in turn, should drive the USD demand and provide a fresh directional impetus to the GBP/USD pair, making it prudent to wait for strong follow-through selling before placing fresh bearish bets.

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