- GBP/USD witnessed some selling on Friday amid a broad-based USD strength.
- The prospects for a faster policy tightening by the Fed underpinned the buck.
- Mixed UK macro releases did little to impress bullish traders or lend support.
The GBP/USD pair remained depressed near the daily low, around the 1.3515-1.3520 region and had a rather muted reaction to the UK macro releases.
The pair witnessed some selling on the last day of the week and extended the overnight sharp pullback from the vicinity of mid-1.3600s, or a three-week high amid a broad-based US dollar strength. Growing market acceptance that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation continued acting as a tailwind for the buck.
In fact, the latest US consumer inflation figures released on Thursday boosted market bets for a 50 bps Fed rate hike in March. Adding to this, St. Louis Fed President James Bullard said that the US central bank should hike rates by 100 basis points over the next three meetings. Apart from this, the risk-off mood further benefitted the safe-haven greenback.
With the USD price dynamics turning out to be an exclusive driver, the GBP/USD pair failed to gain any respite from mixed UK economic data. The UK Office of National Statistics reported that the economy contracted less than anticipated, by 0.2% in December, and expanded by 1% during the fourth quarter of 2021 as against market expectations for the 1.1% increase.
Separately, the UK Industrial/Manufacturing Production figures and a larger than estimated traded deficit did little to lend any support to the British pound or lend any support to the GBP/USD pair. Moving ahead, traders now look forward to the Prelim University of Michigan US Consumer Sentiment Index for some impetus later during the early North American session.
