GBP/USD pares Fed/BoE led gains around 1.2300 ahead of UK Retail Sales, PMI

• GBP/USD seesaws around seven-week high, pauses two-day uptrend.
• BoE matches market forecasts and announced 0.25% rate hike, showing readiness for more if inflation stays high.
• Fed’s dovish hike, banking crisis weigh on Treasury bond yields and US Dollar.
• Mixed US data allowed markets to consolidate recent moves ahead of a slew of data.

GBP/USD bulls take a breather around the highest levels in nearly two months, making rounds to 1.2290 after rising in the last two consecutive days, as the volatile week is left with one last ball to play. The Cable pair cheered the US Federal Reserve’s (Fed) dovish rate hike, as well as the Bank of England’s (BoE) readiness for more rate increases to renew the multi-day top of late. However, the mixed US data and sentiment seem to allow the quote to pare recent gains ahead of the key statistics.

On Thursday, the Bank of England (BoE) raised the policy rate by 25 basis points (bps) to 4.25%, as expected. The policy statement highlighted an increase in Q2 Gross Domestic Product (GDP) forecast while also estimating a slower growth in Consumer Price Index (CPI) for the same. "UK banking system is well-placed to support the economy, including in a period of higher interest rates," added the BoE statement. It should be noted, however, that the policymakers clearly showed readiness for more rate hikes if inflation stays high, which in turn allowed the GBP/USD to remain firmer.

On the other hand, the US Chicago Fed National Activity Index (CFNAI) dropped to -0.19 in February versus 0.0 expected and 0.23 prior. Further, Weekly Initial Jobless Claims declined to 191K for the week ended on March 18, versus 192K prior and 203K market forecasts. It should be noted that the US New Home Sales rose 1.1% in February from 1.8% prior, versus 1.6% analysts’ estimation.

It should be noted that the US Treasury Secretary’s testimony in front of the House Appropriations Financial Services Subcommittee probed the market’s previous risk-on mood and allowed the US Dollar Index (DXY) to pare losses at the seven-week low. “China and Russia may want to develop an alternative to the US dollar,” while also showing preparedness for additional deposit actions `if warranted'. “Strong actions have been taken to ensure deposits are safe,” said US Treasury Secretary Yellen.

Amid these plays, Wall Street pared intraday gains and closed with a light green number whereas the Treasury bond yields also recovered but failed to post a positive closing.

Moving on, UK Retail Sales for February and preliminary readings of the UK and US PMIs for March will be crucial for the GBP/USD pair traders.

Technical analysis

A 10-month-old resistance line, around 1.2345 by the press time, restricts immediate GBP/USD upside amid overbought RSI.