GBP/USD climbs above the 1.1000 figure on soft US dollar

• GBP/USD reached a daily high at 1.1074 due to the London Fix.
• US Initial Jobless Claims fell, cementing the case for further Fed rate hikes.
• GBP/USD Technical Analysis: Testing the 50% Fibonacci, once cleared, could rally towards 1.1210; otherwise, it could retest 1.0538.

The GBP/USD advances for the third consecutive day as the global equities sell-off continues. However, in the FX space, a slight improvement in sentiment keeps most G8 currencies higher against the greenback, despite upbeat US economic data.

At the time of writing, the GBP/USD is trading at 1.1024, above its opening price by 1%, after hitting a daily low of 1.0759.

GBP/USD rallies on mixed US economic data

In the North American session, US economic data was mixed, with GDP for the second quarter coming at -0.6%, as estimated by street analysts. Worth noticing that the government revised GDP data from 2016 Q4 to 2021 Q4, which showed that the economy’s recovery from the Covid-19 pandemic was stronger than initially reported.

At the same time, the US Department of Labor reported Initial Jobless Claims for the week ending on September 24, dropping by 193K less than 215K, showing the labor market resilience, despite headwinds spurred by the Federal Reserve’s restrictive stance.

Meanwhile, Fed officials are keeping to its hawkish narrative. Cleveland’s Fed President Loretta Mester expressed she does not see distress in the US financial markets when asked about what’s happening in the UK. She acknowledged that the Bank of England’s actions pledged to stabilize the bonds market.

Aside from that, Mester added that she still sees inflation as the economy’s main problem and commented that she does not see the case for slowing down. Furthermore, expects rates to peak around 4.6%.

Of late, St Louis Fed President James Bullard said the Fed would need to keep rates “higher for longer” and added that real rates in the positive territory are an “encouraging sign.” Nevertheless, he acknowledged the high recessionary risks while adding that the unemployment rate at 4.5% “would still be healthy for the economy.”

As a backdrop, the US Federal Reserve hiked rates in September by 75 bps, to 3.25%. Odds for the November meeting lie at a 70% chance of another increase of the same size, pushing interest rates to the 4% threshold.

Earlier, the UK’s Prime Minister Liz Truss said that she was willing to take “controversial” decisions, doubling down on its economic plan, laid out by her finance Minister Kwasi Kwarteng.

GBP/USD Price Analysis: Technical outlook

During the last three days, the GBP/USD has recovered some ground vs. the greenback, though today’s rally is testing 1.1047, the 50% Fibonacci retracement, drawn from the last swing high at 1.1738, towards the lowest low, being the YTD low at 1.0356. Therefore, if the pair surpasses the former, the next resistance level to test would be the 61.8% Fibonacci at 1.1210. On the other hand, failure to hurdle it, then a fall towards 1.0884, the 38.2% Fibonacci retracement is likely followed by the September 28 low at 1.0538.