The pi browserGBP/USD pair maintains its upward trajectory with consecutive bullish sessions.
Market sentiment shifts as Dollar weakness combines with renewed Pound strength.
Technical indicators suggest potential overextension despite strong momentum.
The British Pound continues to outperform major counterparts, recording its third consecutive day of substantial gains against the US Dollar. Wednesday's 0.85% advance brings the weekly total to an impressive 2.6% climb, with the currency pair testing levels last seen in mid-November.
Bank of England Governor Andrew Bailey's testimony before Parliament's Treasury Committee provided fresh impetus for Sterling bulls. Contrary to expectations of dovish signals, policymakers indicated that persistent inflation pressures might delay anticipated rate cuts. Money markets now price fewer than two full quarter-point reductions for 2025, a significant recalibration from previous forecasts.
Disappointing private payroll data from ADP failed to dent Dollar sentiment significantly, as traders recognize the indicator's diminished predictive power following methodology changes. Market participants instead await Friday's official employment report, where consensus expects 160K new positions versus January's 143K reading.
The Trump administration's temporary tariff relief for auto imports suggests potential flexibility in trade policy implementation. This development, coupled with broader risk appetite recovery, continues weighing on traditional safe-haven currencies including the Greenback.
From a technical perspective, the pair's decisive break above the 200-day EMA at 1.2685 confirms the bullish trend established since January's 1.2100 lows. However, with daily RSI readings approaching overbought territory and price action deviating significantly from moving averages, short-term consolidation appears increasingly probable before further upside potential materializes.
Traders should monitor whether the pair can establish support above the psychological 1.2800 handle, with resistance emerging near 1.2900. A successful breach could open the path toward 1.3000, though momentum indicators suggest the current pace of appreciation may prove unsustainable without fundamental catalysts.
The upcoming NFP release represents the next potential volatility catalyst, with wage growth figures likely influencing Fed policy expectations more significantly than headline job creation numbers. Any signs of labor market cooling could accelerate the Dollar's recent retreat, while stronger-than-anticipated data might trigger profit-taking in extended Sterling positions.