Risk aversion drags GBP/USD down from weekly highs

After reaching a weekly high of 1.2507, the GBP/USD pair changes direction and declines to the 1.2397 level, at the time of typing, as a result of risk aversion that caused flows towards safe-haven assets.

Despite the fact that US Treasury bond yields are falling, the US Dollar (USD) is still in control. Trading at 1.2401, the GBP/USD is down 0.67%. As Americans grew more “pessimistic” about the economy, the US consumer confidence continued to decline.

Federal Reserve Regional Manufacturing and Services Indices show mixed readings, though flashing a deceleration in the US economy.

BoE Chief Economist says Brits need to accept they’re “poorer”; and therefore, calls for higher rates to tackle inflation. Market sentiment remains deteriorating as the latest tranche of economic data from the United States (US) increased investors’ worries. Consumer Confidence in the United States dipped to its lowest level since July at 101.3, versus estimates of 104.0.

Recessionary concerns were raised by additional data, such as the Philadelphia Fed Non-Manufacturing Activity’s sharp decline to -22.8. After yesterday’s report indicated that the Manufacturing Index fell to -23.4 as business conditions worsened, the Dallas Fed recently released the Services Activity Index for April, which showed a little increase, to -14.4 vs. -18.8 in March.

In accordance with other data, the number of new homes sold in March increased by 9.6%, beating predictions of 1.1%, as mortgage rates remained stable in the face of growing rumours that the Federal Reserve will suspend its tightening cycle.

In light of the situation, the GBP/USD continued to decline as a result of risk aversion, despite falling US Treasury bond yields. The US Dollar Index, which is currently at 101.815, indicates that the dollar is instead gaining by 0.48%.