GBPUSD clings to gains near 1.1900 amid softer USD, lacks bullish conviction
- GBPUSD gains some positive traction on Friday amid subdued USD price action.
- A combination of factors limits the USD downside and keeps a lid on the major.
- A bleak outlook for the UK economy contributes to capping the British Pound.
The GBPUSD pair sticks to its modest intraday gains through the early European session and is currently placed around the 1.1900 round-figure mark.
As investors look past a rather unimpressive UK government's £55 billion fiscal plan, a combination of factors assists the GBPUSD pair to regain positive traction on the last day of the week. Expectations that the Bank of England will continue raising rates to combat stubbornly high inflation act as a tailwind for the British Pound. Apart from this, the better-than-expected monthly UK Retail Sales data offers some support to spot prices amid subdued US Dollar price action.
The downside for the USD, however, remains cushioned amid the prevalent cautious mood. Concerns about economic headwinds stemming from a new COVID-19 outbreak in China, along with geopolitical tensions, continue to weigh on investors' sentiment. Apart from this, the overnight hawkish remarks by St. Louis Fed President James Bullard, saying that the policy is not yet in a range estimated to be sufficiently restrictive to reduce inflation, favour the USD bulls.
Apart from this, the gloomy outlook for the UK economy suggests that the path of least resistance for the GBPUSD pair is to the downside. In fact, the UK Office for Budget Responsibility (OBR) expects the UK GDP to slump by 1.4% next year as compared to a growth of 1.8% projected in March. Hence, any subsequent intraday positive move might still be seen as a selling opportunity and is likely to remain capped. Traders now look to speeches by external BoE MPC members - Catherine Mann and Jonathan Haskel - and the US Existing Homes Sales data for a fresh impetus.
Technical levels to watch