GBP/USD drops back to 1.2300 even as BoE, Fed talks appear less hawkish

• GBP/USD extends the previous day’s pullback from two-month high, stays pressured near intraday low of late.
• Easing supply-chain hurdles in the UK, comments from BoE’s Mann challenge hawkish bias of Governor Andrew Bailey.
• US Dollar grinds higher even as Fed policymakers highlight data dependency, slower rate hikes.
• Inflation woes, banking news will be crucial for fresh impulse amid a light calendar.

GBP/USD renews intraday low near 1.2295 as it stretches the previous day’s U-turn from the highest levels since early February. The Cable pair’s latest pullback could be linked to the chatters suggesting hardships for the Bank of England (BoE) hawks, as well as the US Dollar’s sustained rebound, amid a sluggish Asian session on Thursday.

Reuters quotes the UK’s 13.1% jump in car production during February to mark the easing in the supply-chain woes, which in turn challenges the Bank of England (BoE) Governor Andrew Bailey’s previously hawkish statements. Additionally, BOE policymaker Catherine Mann flagged challenges for the UK’s central bank to do its job in the second half of the year, suggesting more hurdles for the hawks moving forward.

It should be noted that UK Finance Minister Jeremy Hunt’s comments saying, “Core inflation will be harder to bring down,” joined the BoE Governor Bailey’s readiness for more rate hikes, if needed, to put a floor under the Cable price.

On the other hand, the US Dollar Index (DXY) marked the first daily gain in three the previous day, up 0.09% intraday near 102.75 by the press time. A retreat in the US Treasury bond yields joined the quarter-end positioning and cautious optimism in the market to underpin the US Dollar’s latest rebound. Adding strength to the greenback’s rebound could be the geopolitical fears emanating from China, Russia and North Korea. However, an absence of hawkish comments from the Federal Reserve (Fed) officials joins the absence of talks about banking woes to weigh on the US Dollar.

That said, Bloomberg came out with the news suggesting Fed Chair Jerome Powell showed forecasts for one more rate hike in 2023, which in turn pushed back talks of policy pivot and favor the US Dollar bulls. Though, Vice Chair for Supervision Michael Barr said, “We will be looking at incoming data and financial conditions to make a meeting-by-meeting judgment on rates.”

Elsewhere, optimism surrounding the technology and banking sector allows the GBP/USD to fight back the bears.

Against this backdrop, US 10-year and two-year Treasury yields marked their first daily loss in three on Wednesday by ending the North American trading session around 3.57% and 4.10% respectively, making rounds to the same level by the press time. It should be observed that the S&P 500 Futures struggle to extend Wall Street’s gains at the latest.

Moving on, a light calendar in the UK suggests the GBP/USD pair traders watch for risk catalysts and the US factors for clear directions. As a result, the final readings of the US fourth quarter (Q4) Gross Domestic Product (GDP) will join the Q4 Core Personal Consumption Expenditure (PCE) details and the weekly jobless claims will be important to track.

Also read: US February PCE Inflation Preview: Bad news for the Dollar, good news for the Fed?

Technical analysis

A two-week-old rising wedge bearish chart formation lures GBP/USD sellers between 1.2430 and 1.2290 at the latest.