British Pound retreats further from one-week top as USD buying remains unabated

The GBP/USD pair edges lower during the Asian session on Thursday, retreating further from levels beyond the 1.3300 mark, or a one-week high, touched the previous day. Spot prices currently trade just above mid-1.3200s, though a mixed fundamental backdrop warrants some caution before placing aggressive directional bets.

The British Pound (GBP) might continue to draw support from an upward revision of UK Q2 GDP growth to 0.4%, which reaffirmed bets for a 25-basis-point (bps) rate hike by the Bank of England (BoE) at the upcoming meeting on November 5. In contrast, the US PCE data, released on Wednesday, tempered expectations for an October Federal Reserve (Fed) rate hike. This acts as a tailwind for the GBP/USD pair, though the prevailing US Dollar (USD) buying interest caps the upside.

According to CME Group's FedWatch Tool, traders are still pricing in around an 87% chance that the US central bank will raise borrowing costs by the end of this year. Adding to this, oil-driven inflation fears keep US bond yields elevated near multi-year highs. This, along with persistent geopolitical uncertainties stemming from the US-Iran standoff, assists the safe-haven Greenback in preserving its recent strong gains to a two-month high and warrants some caution for GBP/USD bulls.

Traders now look forward to the US economic docket – featuring the usual Weekly Initial Jobless Claims and the ISM Manufacturing PMI. Apart from this, speeches from a slew of influential FOMC members and further developments surrounding the Middle East crisis will drive the USD. The focus, however, will remain glued to the US Nonfarm Payrolls (NFP) report, due on Friday, which will determine the USD trajectory and provide some meaningful impetus to the GBP/USD pair.

GBP/USD daily chart

Technical Analysis

The GBP/USD pair keeps a bearish near-term tone following the overnight failure near the 23.6% Fibonacci retracement level of the August-September downswing. Moreover, successive overhead barriers at 1.3383 and 1.3439 reinforce a downside bias as spot prices consolidate closer to the lower end of the recent range.

Meanwhile, a daily close above these hurdles would be needed to ease the bearish pressure. On the downside, the structural anchor of the move at 1.3203 acts as initial support, and a break below this floor would expose fresh lows in the current bearish cycle.