GBP/USD Hangs on to Average Intraday Gains, No Follow-up Beyond the Mid-1.3100 Zones

The US Dollar Slides

While some US dollars featured for sales during the early hours of the European session, they pulled the GBP/USD pair on a return ride back to the mid-1.3100 zones at the closing hours, even though there was no bullish conviction in the uptick.

After the pullback encountered on the day from the 1.3180 to 1.3185 levels, the GBP/USD currency pair managed to attract a measure of purchase close to the 1.3110 zones on Thursday as it became positive for the third straight day. The US dollar went down close to its two-week low point with the continuous slide it is undergoing. This was considered a major reason that prolonged the needed support for the GBP/USD pair.

GBP/USD price chart. Source TradingView

The United Kingdom’s macro report performed higher than was expected of it and it, in turn, underpinned the progress of the British pound. By record, this shows that the British economy grew by 1.3% in the course of the first quarter of the year 2021 against the 1% growth that was initially estimated. In addition, there was a sharp fall in the United Kingdom’s current account to 7.3 billion pounds in the fourth quarter of the year 2021 all the way from the revised reading of 28.9 billion pounds in the quarter before it.

War and Money

That clarified, a number of factors came together to reduce the losses that would have been deeper for the US dollar and possibly capped any upside move for the GBP/USD currency pair. News from the geopolitical scene deflated the hope of investors who expected a quick diplomatic resolution to the escalated war in Eastern Europe. This as well as the increasing possibility of more sanctions on Russia from Western countries gave more tenor of support to the pair as a safe-haven asset.

In recent events about the war, a spokesman from Russia announced on Wednesday that there have been no signs of a breakthrough yet in their peace talks. Meanwhile, an advisor to the President of Ukraine stated that Russia’s new strategy is to move its forces from Kyiv as it is doing and go encircle Ukrainian troops in preparation for more attacks in the Eastern portion of Ukraine.

Aside from this, the strong expectation of the Federal Reserve’s further interest rate increase to fight inflation is favoring US dollar bulls. The market has eagerly priced in a 50 basis point increase in interest rates for two consecutive meetings of the Federal Reserve.