GBP/USD pause on the way to 1.1200 ahead of UK GDP, US PCE Inflation

• GBP/USD struggles to extend the first weekly gain in three, grinds higher of late.
• BOE policymakers’ aggression, sync between the UK government and the “Old Lady” favor buyers.
• Downbeat US inflation expectations, quarter-end positioning adds strength to the pair’s rebound.
• UK Q2 GDP may confirm recession woes and probe the bears, US inflation could also weigh on prices.

GBP/USD seesaws around 1.1160-55 as buyers brace for the first weekly gain in three during Friday’s Asian session. In doing so, the cable pair cheers the broad US dollar weakness, as well as mixed concerns surrounding the US dollar ahead of the key data from the UK and the US.

BOE Economist Huw Pill amplified pessimism surrounding Britain as the policymaker said, “It’s hard to avoid the conclusion that fiscal easing announced will prompt a significant and necessary monetary policy response in November.” Recently, UK Trade Secretary Kemi Badenoch stated that the chancellor is `working well' with the Bank of England.

With this, the “Old Lady,” as the BOE is known sometimes, appears set for the strong rate hike cycle, which in turn propels the GBP/USD prices.

On the other hand, US Dollar Index (DXY) remains on the back foot at around 111.90 while snapping a two-week uptrend. In doing so, the greenback’s gauge versus the six major currencies fails to justify the recently hawkish Fedspeak and the broad recession fears amid downbeat inflation expectations. This makes today’s Core Personal Consumption Expenditure (PCE) Price Index for August, expected 4.7% YoY versus 4.6% prior, important for the greenback traders.

Also important to watch will be the final readings of the UK’s second quarter (Q2) Gross Domestic Product (GDP), expected to confirm -0.1% initial forecasts.

Given the upbeat expectations from inflation and fears of economic slowdown in the UK, the GBP/USD could pare the latest gains if the scheduled data matches the forecasts.

Also read: US August PCE Inflation Preview: Will it trigger a dollar correction?

Technical analysis

A clear upside break of a two-week-old resistance line, now support around 1.1035, needs to cross the 100-EMA hurdle surrounding the 1.1200 threshold, to keep GBP/USD buyers hopeful. It’s worth noting that the RSI is approaching the overbought territory and hence the upside potential appears limited.