GBP/USD sticks to modest recovery gains above 1.2900, lacks bullish conviction

GBP/USD

FXStreetJul 22, 2024 12:49 AM

GBP/USD kicks off the new week on a positive note amid the emergence of some USD selling.
September Fed rate cut bets, along with the US political development, weigh on the Greenback.
Diminishing odds for an August rate cut by BoE support prospects for further gains for the GBP.

The GBP/USD pair attracts some buyers during the Asian session on Monday and for now, seems to have stalled its corrective slide from the 1.3045 area, or a one-year peak touched last week. Spot prices currently trade around the 1.2930 region, up over 0.10% for the day, though remain close to a one-week low set last Friday.

The US Dollar (USD) kicks off the new week on a weaker note in reaction to the US political development over the weekend and turns out to be a key factor lending some support to the GBP/USD pair. Following a long week of political turmoil, US President Joe Biden stepped down from the 2024 Presidential election. This, in turn, increases the chances of Donald Trump becoming the next US President, which, along with bets that the Federal Reserve (Fed) will cut interest rates in September, boosts investors' appetite for riskier assets and undermines the safe-haven Greenback.

The British Pound (GBP), on the other hand, continues to draw support from diminishing odds of an interest rate cut by the Bank of England (BoE) in August. In fact, BoE Chief Economist Huw Pill noted earlier this month that there is still some work to do before the domestic persistent component of inflation is gone. Adding to this, the UK consumer inflation rose slightly more than expected, by the 2% YoY rate in June. This comes on top of a better-than-expected GDP growth of 0.4% in May and forced investors to push back their expectations for an imminent rate cut.

Moving ahead, there isn't any relevant market-moving economic data due for release on Monday, either from the UK or the US, leaving the GBP/USD pair at the mercy of the USD price dynamics. Hence, the market focus will remain glued to the US political development, which will drive the broader risk sentiment and influence the buck. Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favor of bullish traders and supports prospects for a further intraday appreciating move for the currency pair.

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