Title: GBP/USD climbs to two-week high, retakes 1.1400 and beyond amid sustained USD selling

October 4, 2022 03:42 AM ET

By: AnalysisWatch

The GBP/USD currency pair is bought near the 1.1280 mark and turns positive for the sixth consecutive day on Tuesday. The momentum pushes spot rates to a two-week high, back above the 1.1400 level during the early European session, and is fueled by a number of factors.

The U-turn by the UK government to reverse the controversial tax cut announced in its mini-budget last week continues to support sterling. The U.S. dollar, on the other hand, continues its recent sharp decline from a two-decade high amid the continued decline in U.S. Treasury bond yields, providing additional support to the GBP/USD currency pair.

The Bank of England reiterated its willingness to buy up to GBP 5 billion worth of long-term government bonds, which led to a further decline in U.S. government bond yields from their multi-year high reached last week, and the prevailing risk appetite reflected in a strong rally in global equity markets is also seen as another factor weighing on the safe-haven buck.

The recent upward movement confirms the breakout of the GBP/USD pair above the almost two-month-old resistance of a descending trend line, which may have already set the stage for a continuation of the recent rally from the all-time low reached last Monday. In the absence of macro data from the UK, spot rates remain at the mercy of USD price momentum.

Later in the early North American session, traders will be watching for U.S. economic data, which includes the release of JOLTS labor market data and manufacturing new orders. Together with FOMC members' speeches, US bond yields, and overall risk sentiment, this will boost USD demand and provide a significant boost to the GBP/USD pair.