The GBP/USD pair hovers around 1.2760 during the European session, recovering from intraday losses as the US Dollar (USD) weakens on softer US bond yields and subdued Producer Price Index (PPI) data. Geopolitical tensions in the Middle East, triggered by military attacks on Iran-led Houthi targets, have impacted both USD strength and overall sentiment in the GBP/USD pair.
The US Dollar Index (DXY) trims gains due to declining US Treasury yields, driven by increased speculation of potential rate cuts by the US Federal Reserve (Fed) in March. Barclays’ revised forecast, advancing the expected rate cut to March from June, has fueled this speculation.
Softer-than-expected PPI data released on Friday has also contributed to downward pressure on the USD. The GBP/USD pair may have received a boost from improved UK industrial sector data in November, with industrial production rebounding according to the Office for National Statistics (ONS).
On Monday, the Rightmove House Price Index (MoM) for January showed a 1.3% improvement, providing additional support. Traders will keep a close eye on upcoming labor market data, including Claimant Count Change and ILO Unemployment Rate (3M). The geopolitical landscape and economic indicators continue to shape the GBP/USD pair’s trajectory.