GBP/USD clings to stronger UK wage growth data-inspired gains, just below mid-1.2400s

• GBP/USD regains strong positive traction on Tuesday and snaps a two-day losing streak.
• The upbeat UK wage growth data lifts bets for more BoE rate hikes and underpins the GBP.
• A positive risk tone weighs on the safe-haven USD and provides an additional lift to the pair.

The GBP/USD pair catches aggressive bids on Tuesday and stalls a two-day corrective decline from its highest level since June 2022, around the 1.2545 region touched last week. The pair sticks to its strong intraday gains, around the 1.2435-1.2440 area, through the first half of the European session and for now, seems to have snapped a two-day losing streak to a one-week low set on Monday.

The British Pound strengthens across the board after the UK Office for National Statistics (ONS) reported stronger-than-expected wage growth data from the UK, which will keep pressure on the Bank of England (BoE) to raise interest rates further. In fact, the UK Office for National Statistics (ONS) reported that Average Earnings (including bonuses) rose 5.9% during the three months to February, while labor cost (excluding bonuses) came in at 6.6%, both beating consensus estimates. The hot wage growth figures, to a larger extent, overshadow an uptick in the jobless rate and an unexpected jump in the number of people claiming unemployment-related benefits.

Apart from this, a generally positive risk tone undermines the safe-haven US Dollar (USD) and provides an additional boost to the GBP/USD pair. The downside for the USD, however, seems cushioned amid speculations that the Federal Reserve (Fed) will continue raising interest rates. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC monetary policy meeting in May. This, in turn, keeps the US Treasury bond yields elevated, which supports prospects for the emergence of some dip-buying around the USD and keeps a lid on any further intraday appreciating move for the GBP/USD pair, at least for the time being.

Market participants now look forward to the US housing market data - Building Permits and Housing Starts - for some impetus later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair. The focus, however, will remain glued to the release of the latest consumer inflation figures from the UK on Wednesday, which will play a key role in driving demand for the Sterling Pound.

Technical levels to watch