GBP/USD eases from one-month peak, still well bid above 1.2200 mark amid weaker USD

• GBP/USD climbs to a one-month high on Friday amid the prevalent USD selling bias.
• Expectations for gradual Fed hike rates, sliding US bond yields undermines the USD.
• The risk-on impulse is exerting additional downward pressure on the safe-haven buck.

The GBP/USD pair gains traction for the third successive day on Friday and jumps to a one-month high during the early European session. Spot prices, however, retreat a few pips from the daily peak, though have managed to hold comfortably above the 1.2200 round-figure mark.

The US dollar selling bias remains unabated on the last day of the week amid speculations that the Fed would not raise interest rates as aggressively as previously estimated. Broad-based USD weakness turns out to be a key factor that continued pushing the GBP/USD pair higher.

In fact, the Fed on Wednesday acknowledged that economic indicators have softened and noted signs of a slowdown. Furthermore, Fed Chair Jerome Powell said that the pace of its hiking campaign could slow at some point and that the move would be dependent on the incoming macro data.

Thursday's disappointing US GDP report reinforced expectations that the Fed would not raise interest rates as aggressively as previously estimated. The market reprising led to a further decline in the US Treasury bond yields, which is exerting additional downward pressure on the buck.

The incoming macro data, meanwhile, have raised concerns about an economic downturn and could force major central banks to ease off their aggressive policy tightening cycle. This, in turn, is booting the global risk sentiment and further undermining the safe-haven greenback.

The British pound is further drawing support from rising bets for a 50 bps rate hike by the Bank of England at its upcoming meeting in August. Apart from this, sustained strength and acceptance above the 1.2200 mark support prospects for a further appreciating move for the GBP/USD pair.

Market participants now look forward to the release of the US Personal Consumption Expenditures (PCE report) - the Fed preferred inflation gauge - later during the early North American session. The data might influence the USD demand and provide a fresh impetus to the GBP/USD pair.

Technical levels to watch