GBP/USD retreats from 1.2760 as UK Gilts flag recession woes, focus on BoE’s Bailey, Fed’s Powell

• GBP/USD remains on the back foot amid market’s cautious mood ahead of key speeches from BoE, Fed leaders.
• UK two-year Gilts jump to 15-year high, markets place 20% bets on 6.5% BoE rate peak.
• Upbeat US data, fears emanating from China allow US Dollar to consolidate weekly gains.
• Fed’s Powell has a tough task convincing bulls than BoE’s Bailey but British recession may lure Cable bears.

GBP/USD clings to mild losses around 1.2730 heading into Wednesday’s London open, reversing the previous day’s rebound amid mixed catalysts of late.

Even so, escalating fears of higher interest rates at the Bank of England (BoE) and the resulted UK recession woes weigh on the Pound Sterling prices. On the contrary, mostly upbeat US data joins mixed concerns about China to prod the Cable sellers.

While portraying the same, the UK’s two-year Gilt jumps to the highest levels in 15 years, to 5.24% at the latest, as well as flagging fears of a 6.5% BoE peak rate in 2024.

On the other hand, hopes of more stimulus from China contrasts with the growing fears of slower economic recovery in Beijing, as well as the fears of the Sino-American tussles due to the latest AI curbs on Chinese Chip manufacturing companies, luring the GBP/USD bears. Further, a slew of the US data allowed the US Dollar to pare intraday losses and increase the hawkish Fed bets, which in turn prod the Pound Sterling bulls of late. Notable among them were the Durable Goods Orders, Conference Board's (CB) Consumer Confidence Index and a few housing numbers.

Against this backdrop, S&P500 Futures pare the biggest daily jump in a fortnight with mild losses whereas the US Treasury bond yields remain depressed after rising in the last two consecutive days to portray the market’s dicey momentum.

Looking ahead, speeches from BoE’s Bailey and Fed Chair Powell will be crucial to watch for the immediate GBP/USD moves. Major attention, however, will be given to the UK recession woes, which in turn could please GBP/USD bears.

Technical analysis

A 12-day-old rising support line, near 1.2720 by the press time, restricts the short-term downside of the GBP/USD pair.