GBP/USD reclaims 1.3400 amid an improved market mood and USD weakness

• The GBP/USD advances 0.28% during the North American session.
• An improved market mood and increasing bets of the BoE hiking five times keep the GBP bid.
• GBP/USD is downward biased in the long-term but, in the near-term, is under upward pressure.

The British pound extends its recovery, amid on Friday snapping two days in a row loss. At the time of writing, the GBP/USD is trading at 1.3434 in the North American session. As shown by the cash markets in Europe, the market sentiment is positive but, US equity futures point to a lower open. Nevertheless, risk-sensitive currencies, led by the antipodeans and the GBP, rise in the day to the detriment of the greenback.

Risk appetite and money markets expecting five rates hikes by the BoE underpins the GBP

Since the Asian session, the pair remained buoyant, rising to the daily high around 1.3450, as market mood carried the New York appetite throughout the weekend. It appears the lift in the GBP is attributed to the Bank of England monetary policy meeting, to be held on February 3, where market participants expect a rate hike towards 0.50%. Furthermore, In the last couple of hours, money markets expect five rates of the Bank of England, expecting the bank’s rate to finish around 1.50%, according to Reuters.

In the meantime, some headlines throughout the weekend, the UK’s PM Boris Johnson and Chancellor Rishi Sunak aim to finalize a package of measures to support low-income households. Regarding domestic political issues, UK’s Foreign Secretary Liz Truss said that PM Boris Johnson is the best person to lead the Tories to the next election.

Atlanta’s Fed President does not rule out a 50 bps rate hike

Over the weekend, Atlanta’s Fed President Raphael Bostic expressed that he foresees at least three rate hikes, beginning in March, but emphasized that the US central bank would increase 50 basis points if inflations remain “stubbornly high,” according to the FT.

An absent UK economic docket left the pair lying in the dynamics of the BoE’s monetary policy meeting ahead. In contrast, the US economic docket on Monday would feature the Chicago PMI and the Dallas Fed Manufacturing Index, both for January. The readings for the former is expected at 61.7, while Dallas Mfg. Index for December was 8.1.

GBP/USD Price Forecast: Technical outlook

The GBP/USD remains downward biased. The daily moving averages (DMAs) stay above the spot price, except for the 50-DMA, underneath at 1.3416, acting as support. Nevertheless, the 100-DMA at 1.3517 is at the reach of the GBP/USD spot price, though a daily close above is required to open the door for higher prices.

That said, the GBP/USD first resistance would be 1.3500. A breach of the latter would expose the former 100-DMA at 1.3517.

Contrarily, the GBP/USD first support would be the 50-DMA at 1.3416. A break of that level would open the door towards 1.3400 that if it gives way to USD bulls (let’s not count them out, as month-end flows loom), that would pave the way towards the 2022 YTD low at 1.3357.