The GBP/USD recovery is gaining traction early Monday, as bulls recapture 1.2250 amid the upbeat UK GDP data and a cautious mood. The US Dollar rebound fades, as Treasury yields remain a drag amid pre-Fed anxiety.
The pair started the new week in an indecisive manner with market participants refraining from making large bets ahead of the high-tier data releases and all-important central bank decisions. The pair’s short-term technical outlook points to a loss of bullish momentum but it would be surprising to see a significant move in either direction in the remainder of the day.
Earlier in the day, the data published by the UK’s Office for National Statistics (ONS) revealed that Gross Domestic Product (GDP) grew by 0.5% on a monthly basis in October following September’s 0.6% contraction. This reading came in much better than the market expectation for a contraction of 0.1% but the positive impact of the upbeat GDP data on the Pound Sterling remained short-lived.
Following the GDP data, UK Finance Minster Jeremy Hunt told BBC News that the UK economy was likely to get worse before it gets better.
Meanwhile, the UK’s FTSE 100 Index trades modestly lower on the day and the US stock index futures hold flat, pointing to a neutral market mood on Monday.
The US economic docket will not offer any high-impact data releases. The 10-year US Treasury note auction could impact the US Dollar’s valuation in the American session but the pair is likely to extend its consolidation at least until tomorrow’s UK jobs data and US inflation report.