GBP/USD rallies to nearly two-month peak amid the emergence of fresh USD selling

• GBP/USD gains strong positive traction on Thursday and touches a fresh multi-week high.
• The risk-on mood undermines the safe-haven USD and provides a goodish lift to the pair.
• A move beyond the mid-1.2300s favours bulls amid a supportive fundamental backdrop.

The GBP/USD pair reverses an intraday dip to sub-1.2300 levels and climbs to its highest level since early February during the first half of the European session on Thursday. The pair currently trades just above the mid-1.2300s and seems poised to prolong its recent upward trajectory from the 1.1800 round-figure mark, or the YTD low touched earlier this March.

The global risk sentiment remains well supported by receding concerns over the banking sector, which is seen undermining the safe-haven US Dollar (USD) and turning out to be a key factor pushing the GBP/USD pair higher. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. Moreover, the fact that no further cracks have emerged in the banking sector over the past two weeks suggests that a widespread banking crisis might have been averted. The developments continue to boost investors' confidence and drive flows away from traditional safe-haven currencies, including the Greenback.

The British Pound, on the other hand, draws additional support from a more hawkish commentary by the Bank of England (BoE) Governor Andrew Bailey, saying that interest rates may have to move higher if there were signs of persistent inflationary pressure. Furthermore, Bailey told the House of Commons Treasury Select Committee on Tuesday that the UK banking system is in a strong position and is not experiencing stress linked to the global turmoil in the banking sector. This, in turn, lifted bets for additional rate hikes by the BoE, which continues to act as a tailwind for the Sterling and remains supportive of the GBP/USD pair's strong move up.

With the latest leg up, spot prices now seem to have cleared a hurdle near the 1.2345-50 region, which favours bullish traders and supports prospects for a further near-term appreciating move. That said, the lack of strong follow-through buying warrants some caution ahead of the release of the US Core PCE Price Index - the Fed's preferred inflation gauge - on Friday. In the meantime, traders on Thursday will take cues from the US economic docket, featuring the final Q4 GDP print and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch