GBP/USD gains some positive traction on Monday amid the emergence of fresh USD selling.
The divergent Fed-BoE outlook and the recent breakout above the 200-day SMA favor bulls.
Traders look to flash UK/US PMIs for some impetus ahead of BoE Governor Bailey’s speech.
The GBP/USD pair continues to show some resilience below the 1.2900 round-figure mark and attracts some dip-buyers during the Asian session on Monday. Spot prices currently trade around the 1.2930 region, up nearly 0.10% for the day, and for now, seems to have snapped a two-day losing streak to a one-and-half-week low touched on Friday.
The US Dollar (USD) kicks off the new week on a weaker note and stalls a three-day-old recovery move from a multi-month low, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. Despite the fact that the Federal Reserve (Fed) gave a bump higher to its inflation projection, investors seem convinced that a tariff-driven US economic slowdown might force the central bank to resume its rate-cutting cycle soon. This, along with a positive tone around the US equity futures, seems to undermine the safe-haven Greenback.
The British Pound (GBP), on the other hand, draws support from the Bank of England's (BoE) relatively hawkish stance. In fact, the UK central bank warned against assumptions for cuts and also increased its forecast for a peak in inflation this year. This suggests that the BoE will lower borrowing costs more slowly than other central banks, including the Fed, which lends additional support to the GBP/USD pair. Moreover, the recent breakout above the 200-day Simple Moving Average (SMA) for the first time since November favors bullish traders.
Moving ahead, traders now look forward to the release of flash PMIs from the UK and the US for some meaningful impetus. Apart from this, speeches from influential FOMC members would drive the USD demand, which, along with BoE Governor Andrew Bailey's comments, should produce short-term trading opportunities around the GBP/USD pair. Nevertheless, spot prices remain within the striking distance of the highest level since November touched last week and the fundamental backdrop supports prospects for additional gains.
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