GBP/USD moves sideways near 1.2720 with a positive bias amid stable US Dollar

• GBP/USD rises on elevated speculation of interest rate cuts by the Fed in early 2024.
• Downbeat US Treasury yields put pressure on the US Dollar.
• Former Dallas Fed President Robert Kaplan expects the Fed not to be overly restrictive.
• UK Retail Sales showed improvement in November. While UK GDP came in softer in Q3.

GBP/USD hovers around 1.2720 during the Asian session on Wednesday. The US Dollar (USD) encounters downward pressure against Pound Sterling (GBP) as growing speculations of potential easing by the US Federal Reserve (Fed).

The weakening sentiment is intensified by the fall in US Treasury yields, contributing to the factors eroding the strength of the US Dollar. The 2-year and 10-year yields on US bond coupons trade lower, standing at 4.29% and 3.88%, respectively, at the time of writing.

Former Dallas Federal Reserve President Robert Kaplan conveyed his thoughts to the media on Tuesday. Kaplan stressed the Federal Reserve's past mistake of prolonged excessive accommodation, despite positive economic indicators. He believes the central bank is now wary of repeating this error on the flip side, being cautious not to become overly restrictive and hinder economic growth.

The British Pound (GBP) found support on Friday, thanks to better-than-expected Retail Sales figures from the United Kingdom (UK) in November. Retail Sales (Month-on-Month) saw a growth of 1.3%, surpassing the forecast of 0.4% and rebounding from October's stagnant reading of 0.0%. Retail Sales (YoY) exceeded market expectations, registering a 0.1% increase compared to the anticipated decline of 1.3%. This marked a turnaround from the previous 2.5% decline.

However, the UK Gross Domestic Product (GDP) for Q3 came in below expectations. GDP (YoY) came in at just 0.3% versus the forecast hold at 0.6%. GDP (QoQ) declined by 0.1% versus the forecast 0.0% flat reading.

On Thursday, Initial Jobless Claims and Pending Home Sales from the United States (US) will be released. In the absence of the high-impact data from the UK’s docket, the low-impact Nationwide Housing Prices is due on Friday.