GBP/USD recovers early lost ground, steadily climbs back above mid-1.2200s

• GBP/USD found decent support ahead of the weekly low following the release of UK PMIs.
• Some cross-driven strength stemming from a slump in EUR/GBP further benefitted the GBP.
• Hawkish Fed expectations continued acting as a tailwind for the USD and might cap the pair.

The GBP/USD pair attracted some dip-buying near the 1.2170 area on Thursday and recovered around 80-85 pips from the vicinity of the weekly low touched the previous day. The pair was seen trading just above mid-1.2200s during the early North American session, nearly unchanged for the day.

The British pound drew support from better-than-expected UK PMI prints for June and some cross-driven strength stemming from the dismal Eurozone PMIs-led turnaround in the EUR/GBP cross. This, in turn, was seen as a key factor that offered some support to the GBP/USD pair, though a combination of factors might hold back bulls from placing aggressive bets.

The US dollar was back in demand amid firming expectations that the Fed hike interest rates at a faster pace to combat stubbornly high inflation. In fact, the markets have been pricing in another 75 bps rate hike move at the upcoming FOMC meeting in July. Apart from this, the worsening global economic outlook offered additional support to the safe-haven buck.

On the economic data front, the US Department of Labor there were 229K initial jobless claims in the week ending June 18 as against 227K anticipated. The previous month's reading was also revised higher to 231K from the 229K reported earlier. This, however, did little to dent the intraday USD bullish tone, which acted as a headwind for the GBP/USD pair.

Apart from this, speculations that the Bank of England would opt for a more gradual approach towards raising interest rates further contributed to capping the GBP/USD pair. This, along with the UK-EU impasse over the Northern Ireland Protocol of the Brexit agreement, supports prospects for some meaningful downside for the major.

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