GBP/USD consolidates around 1.3300 mark; downside potential seems limited
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GBP/USD lacks any firm intraday direction and oscillates in a range at the start of a new week.
The USD preserves last week’s recovery gains from a multi-year low and acts as a headwind.
Bets for a less dovish BoE and hopes for a UK-US trade deal to limit the downside for the major.
The GBP/USD pair kicks off the new week on a subdued note and oscillates in a narrow band around the 1.3300 round-figure mark during the Asian session.
The US Dollar (USD) preserves last week's recovery gains from a multi-year low amid the uncertainty over US-China trade talks, which, in turn, is seen as a key factor acting as a headwind for the GBP/USD pair. US Treasury Secretary Scott Bessent said on Sunday that he did not know if US President Donald Trump had talked to Chinese President Xi Jinping. This keeps a lid on the optimism led by Trump's assertion that tariff talks with China were underway and underpins the USD's relative safe-haven status.
The British Pound (GBP), on the other hand, draws some support from the upbeat domestic data released on Friday and hopes that the UK will strike a trade deal with the US soon. In fact, UK Retail Sales unexpectedly rose by 0.4% in March following the previous month's downwardly revised growth of 0.7%. For the first quarter as a whole, retail sales rose by 1.6% - marking the strongest reading in four years and tempering market expectations for a more dovish Bank of England (BoE) rate-cut path going forward.
In contrast, traders have been pricing in the possibility that the Federal Reserve (Fed) will resume its rate-cutting cycle in June and lower borrowing costs at least three times by the end of this year. This, along with concerns about the economic fallout from Trump's trade policies, is holding back the USD bulls from placing fresh bets and lending some support to the GBP/USD pair. Hence, it will be prudent to wait for strong follow-through selling before positioning for any meaningful downside for spot prices.
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