GBP/USD sticks to modest gains around mid-1.2400s, just below two-week top post-US ADP

• GBP/USD turns positive for the fifth straight day and climbs to a two-week high.
• Diminishing odds for a Fed rate hike in June weigh on the USD and lend support.
• The upbeat US ADP report limits the USD losses and caps the upside for the pair.

The GBP/USD pair reverses an intraday dip to the 1.2400 round-figure mark and turns positive for the fifth successive day on Thursday. Spot prices, however, retreat a few pips from a two-week high touched during the early North American session and trade around mid-1.2400s following the release of the US ADP report.

The US Dollar (USD) ticks higher after Automatic Data Processing (ADP) reported that private sector employers added 278K jobs in May, higher than 170K expected, and caps the upside for the GBP/USD pair. That said, reduced bets for another 25 bps rate hike by the Federal Reserve (Fed) in June keep the USD below its highest level since mid-March touched the previous day and continues to lend support to the major.

It is worth recalling that a duo of FOMC members on Wednesday showed a willingness to pause interest rate hikes this month. Furthermore, the progress towards averting an unprecedented US debt default undermines the safe-haven buck and acts as a tailwind for the GBP/USD pair. In fact, the US House of Representatives voted in favour of a bill to suspend the debt ceiling late Wednesday and the deal now heads to the Senate for approval.

This, along with expectations that the Bank of England (BoE) could raise rates further, suggests that the path of least resistance for the GBP/USD pair is to the upside. Even from a technical perspective, a move beyond the 50-day Simple Moving Average (SMA) adds credence to the positive outlook. This, in turn, supports prospects for an extension of the recent bounce from the 1.2300 mark, or its lowest level since early April touched last week.

Technical levels to watch