The GBP/USD currency pair has experienced a notable upswing, trading above the 100-day Simple Moving Average (SMA) at 1.2648. This movement signals a neutral to upward bias for the pair. The Pound Sterling advanced early in the North American session, rebounding from a two-day low of 1.2605. The Greenback's weakening, driven by falling US Treasury yields, has contributed to this trend. At the time of writing, the GBP/USD trades at 1.2669, marking a 0.37% gain.
The US Dollar is facing mounting selling pressure, which has pushed it to two-month lows. The US 10-year Treasury note saw a significant drop, plummeting 10 basis points (bps) to 4.30%. This decline in yields is attributed to weaker-than-expected economic data from the United States. Meanwhile, the market mood has soured due to threats of tariffs from US President Donald Trump.
A daily close above the 100-day SMA for the GBP/USD could pave the way for further gains, potentially clearing 1.2700 and targeting the 200-day SMA at 1.2786. However, if the pair struggles at the 100-day SMA and falls below 1.2600, sellers could drive prices toward the February 5 peak turned support at 1.2549.
Economic indicators have not favored the US Dollar recently. The S&P/Case-Shiller Home Prices for December increased by 4.5% year-on-year, slightly up from November's 4.3%, but this has not been enough to bolster the currency. The falling yields reflect investor concerns over economic growth and inflationary pressures.
In contrast, the British Pound has shown resilience, with particular strength against the New Zealand Dollar. This momentum comes despite challenges in domestic markets, where British retailers plan to cut investment by the most in over five years due to weak consumer spending and elevated prices.
Market expectations anticipate that the Bank of England (BoE) will maintain interest rates at 4.50% in March, with a potential rate cut to 4.25% by the second quarter. A Reuters poll revealed that 65 economists predict the BoE will keep rates unchanged in March before considering a reduction later in the year.
These developments have set the stage for heightened volatility in currency markets. The interplay between US economic data and geopolitical factors continues to influence investor sentiment and currency valuations.