GBP/USD stays firmer past 1.2400 on hopes of more BoE rate hikes, US employment in focus

• GBP/USD grinds higher at weekly top after four-day uptrend.
• Recent data, BoE talks underpin concerns of UK’s sticky inflation, suggest more rate lifts from “Old Lady”.
• Hopes of debt ceiling deal passage in US House, mixed US data prod US Dollar bulls after refreshing DXY peak.
• US ADP Employment Change, PMIs in focus for clear directions.

GBP/USD bulls stay in the driver’s seat for the fifth consecutive day, despite the Asian-session latest inaction around 1.2440 during early Thursday. In doing so, the Cable pair not only cheers the latest retreat of the US Dollar but also benefits from the hints that the UK’s inflation problem is bigger and can push the Bank of England (BoE) towards more rate hikes.

On Wednesday, Lloyds Bank unveiled monthly releases of its business sentiment gauge and inflation signals for May. On the same line, Bank of England (BoE) Monetary Policy Committee member Catherine Mann said that the gap between the headline and core inflation in the UK is more persistent than in the US and the Euro area, per Reuters.

On the other hand, the US Dollar Index (DXY) initially rose to the highest levels since March 15 before retreating from 104.70. The greenback’s latest pullback could be linked to the recently mixed US data and receding fears that the US will default on its government debt payment.

The hope of US debt ceiling passage from the House of Representatives increased after US Senate Republican Leader McConnell conveyed expectations of the US debt ceiling bill passing and reaching the Senate on Thursday.

Elsewhere, US JOLTS Job Openings rose to 10.103M in April versus 9.375M expected and 9.745M prior whereas Chicago Purchasing Managers’ Index dropped to 40.4 for May from 48.6 prior and 47.0 market forecasts.

It should be noted that the mixed comments from the Federal Reserve (Fed) officials also weighed on the US Dollar late Wednesday. That said, Federal Reserve (Fed) Governor Michelle Bowman cited recovery in the residential real estate market while also adding, “The leveling out of home prices will have implications for the Fed's fight to lower inflation,” per Reuters. Before him, Clevland Fed President Loretta Mester suggested that the Fed must go for a rate hike in June.

Furthermore, Fed Governor and vice chair nominee Philip Jefferson said that skipping a rate hike would allow the Fed "to see more data before making decisions about the extent of additional policy firming,” per Reuters. On the same line was Federal Reserve Bank of Philadelphia President Patrick Harker who also said on Wednesday that he is inclined to support a "skip" in interest rate hikes at the central bank's next meeting in June.

With this in mind, Wall Street Journal’s (WSJ) Nick Timiraos signaled that Federal Open Market Committee (FOMC) is likely to hold interest rates steady in June.

Amid these plays, Wall Street closed with minor losses and the yields were down while the US Dollar Index (DXY) ended Wednesday’s North American trading on the positive side despite the latest retreat.

Moving on, the US House of Representatives is debating the US debt ceiling extension and will vote on it at around 00:30 GMT, which will be key to watch ahead of a slew of the US employment and activity data.

Also read: US ADP Employment, ISM Manufacturing PMI Preview: First down, then up for US Dollar?

Technical analysis

Despite the GBP/USD pair’s successful recovery from the 100-DMA support of around 1.2300, the buyers need validation from the 50-DMA hurdle of near 1.2450.