The GBP/USD pair scales higher for the third successive day on Friday and climbs to its highest level since May 2022, around the 1.2635 region. The pair, however, trims a part of its intraday solid gains and trades around the 1.2600 mark during the first half of the European session, still up over 0.20% for the day.
The US Dollar (USD) struggles to capitalize on the modest overnight bounce from a one-week low and meets with some supply on the last day of the week, which, in turn, is seen as a key factor pushing the GBP/USD pair higher. Against the Federal Reserve’s (Fed) less hawkish outlook, a modest recovery in the global risk sentiment – as depicted by a generally positive risk tone – undermines the safe-haven Greenback. It is worth recalling that the US central bank outlined a more stringent and data-driven approach to hiking rates on Wednesday.
Moreover, Fed Chair Jerome Powell signaled that the central bank was close to hitting the terminal rate of the current tightening cycle. This and fears of a full-blown US banking crisis and debt ceiling continue to weigh on the buck. The British Pound, on the other hand, continues to draw support from rising bets for an additional 25 bps rate hike by the Bank of England (BoE) in May, which, in turn, lends additional support to the GBP/USD pair. That said, a further recovery in the US Treasury bond yields acts as a tailwind for the USD and caps gains for the major.
Traders also seem reluctant to place aggressive bets and await the release of the closely-watched US monthly employment data, due later during the early North American session. The popular NFP report will influence the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Nevertheless, spot prices remain on track to register modest gains for the third week. Moreover, the fundamental backdrop favors bulls and supports prospects for a further appreciating move.