GBP/USD recovers to 1.2450 amid US debt ceiling struggle, US/UK PMIs eyed

• GBP/USD picks up bids to refresh intraday high, reverses the week-start loss.
• US President Biden, House Speaker McCarthy fail to offer deal on debt ceiling extension but sound hopeful of avoiding default.
• UK’s inflation fears jostle with BoE’s dovish hike to prod Pound Sterling buyers.
• UK/US Preliminary PMIs for May will guide intraday moves, risk catalysts are the key.

GBP/USD cheers the US Dollar pullback to regain upside momentum, after a downbeat start of the week, as it renews its intraday high near 1.2450 during early Tuesday. In doing so, Cable also benefits from the hawkish hopes surrounding the Bank of England (BoE) amid inflation fears.

That said, US President Joe Biden and House Speaker Kevin McCarthy failed to offer a deal to avoid the debt ceiling expiry during the latest negotiations. Even so, the policymakers remain hopeful of reaching an agreement to avoid the US default. “I just concluded a productive meeting with Speaker McCarthy about the need to prevent default,” said US President Joe Biden per the White House announcements shared by Reuters late Monday. On the other hand, US House Speaker McCarthy said that meeting with Biden was productive but no debt ceiling deal.

On the other hand, the Financial Times (FT) quotes the latest Ipsos Mori survey of 29 countries around the world while saying, “People in the UK are among the least confident that the financial authorities will bring inflation under control quickly.” It should be noted that the BoE policymakers’ expectations of easing inflation joined the hawkish Fed talks to weigh on the Pound Sterling previously.

While talking about the Fed statements, Minneapolis Federal Reserve President Neel Kashkari favored the rate hike trajectory while citing the fears of the US default and banking crisis, which in turn allowed the US Dollar to remain firmer. On the same line, St. Louis Federal Reserve President James Bullard ruled out the recession concerns on Monday while saying that He sees two more rate hikes this year before reaching the base rate. Furthermore, Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin and San Francisco President Mary C Daly recently backed the calls for higher rates.

Elsewhere, market sentiment remains jittery amid the US default fears and the US-China tension. While portraying the mood, the S&P500 Futures print mild gains while tracing Wall Street’s performance whereas the US Treasury bond yields take a breather at the multi-day high.

Moving on, the first readings of the UK’s S&P Global/CIPS PMIs for May will precede the US S&P Global PMIs for the said month to direct intraday moves. However, major attention will be given to the aforementioned risk catalysts and the UK’s inflation data, to be published on Wednesday.

Also read: US S&P Global PMIs Preview: Dollar set to rise on a slip in the services sector

Technical analysis

A six-week-old ascending support line joins the 50-DMA to highlight 1.2420-15 region as the short-term key support. It’s worth noting that the oscillators and the latest GBP/USD price pattern has been less impressive for the bulls.