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The GBP/USD currency pair experienced a sharp decline, falling over 60 pips, as robust US economic data and a surge in Treasury yields bolstered the US Dollar. The pair flirted with the crucial 1.2500 support level.
US Economic Strength Fuels Dollar Demand
Key US economic indicators pointed to a strong economy. Initial jobless claims fell below expectations, indicating a resilient labor market. Furthermore, GDP growth for the third quarter exceeded estimates, solidifying the positive economic outlook.
BoE Holds Rates Steady, Market Uncertainty Remains
The Bank of England (BoE) maintained its interest rate at 4.75% in a split decision, with six members voting to hold and three favoring a cut. Market expectations for future rate adjustments remain uncertain, with the probability of a rate hold in February 2025 currently at 57%.
Rising Treasury Yields Bolster Dollar
The significant rise in US Treasury yields, with the 10-year yield climbing seven basis points to 4.592%, provided strong support for the US Dollar. This surge in yields underpinned the Greenback, as reflected in the strengthening US Dollar Index (DXY).
Technical Outlook
The GBP/USD pair is rapidly approaching the November 22 low of 1.2486. A break below this level could open the path towards the April 22 low of 1.2299. Conversely, a successful defense of the 1.2500 level could allow for a potential recovery towards 1.2600 and potentially higher levels, targeting the December 17 high of 1.2728.
