The British pound has risen against the US dollar, breaking out of a three-month low. The US dollar’s fall from its multi-month high is a positive development. Traders will closely watch this week’s macro data from the UK and the US.

The GBP/USD currency pair reversed a three-day loss of over 100 pips during Friday’s Asian session. The pair lost steam close to 1.2500, highlighting the significance of that milestone.

Even though the Department of Labor reported a decrease in Initial Jobless Claims to 216,000 from 229,000 on Thursday, the US dollar remained strong and kept GBP/USD under pressure.

The greenback’s gains were contained in Asian trading hours on Friday due to falling US Treasury bond yields and a bullish risk mentality, allowing GBP/USD to recoup some of the week’s losses.

Markets may react to shifts in risk perception even if the United States does not release significant economic data before the weekend. US stock index futures were unchanged during the European session despite a bullish opening, suggesting investors avoid risk rallies.

Due to the Bank of England’s (BoE) cautious stance this week, investors have lowered their forecasts for the bank’s terminal rate. According to Reuters, the likelihood of a 5.75 percent BoE terminal rate has decreased to 85% from 6.50 percent in July. Investors may be apprehensive of a sustained GBP/USD exchange rate rise even if the market conditions improve.

Trade Idea:

The currency pair GBP/USD shows signs of recovery from a three-month low, but traders remain cautious ahead of key data releases.