GBP/USD pulls back from one-year peak, retreats to 1.2600 as traders look to NFP report

• GBP/USD gains traction for the third straight day and climbs to a one-year top on Friday.
• The emergence of fresh selling around the USD is seen lending some support to the pair.
• Traders now look forward to the release of the crucial US NFP report for a fresh impetus.

The GBP/USD pair scales higher for the third successive day on Friday and climbs to its highest level since May 2022, around the 1.2635 region. The pair, however, trims a part of its strong intraday gains and trades around the 1.2600 mark during the first half of the European session, still up over 0.20% for the day.

The US Dollar (USD) struggles to capitalize on the overnight modest bounce from a one-week low and meets with some supply on the last day of the week, which, in turn, is seen as a key factor pushing the GBP/USD pair higher. Against the backdrop of the Federal Reserve's (Fed) less hawkish outlook, a modest recovery in the global risk sentiment - as depicted by a generally positive risk tone - undermines the safe-haven Greenback. It is worth recalling that the US central bank on Wednesday outlined a more stringent and data-driven approach to hiking rates further.

Moreover, Fed Chair Jerome Powell signalled that the central bank was close to hitting the terminal rate of the current tightening cycle. This, along with fears of a full-blown US banking crisis and debt ceiling, continues to weigh on the buck. The British Pound, on the other hand, continues to draw support from rising bets for an additional 25 bps rate hike by the Bank of England (BoE) in May, which, in turn, lends additional support to the GBP/USD pair. That said, a further recovery in the US Treasury bond yields acts as a tailwind for the USD and caps gains for the major.

Traders also seem reluctant to place aggressive bets and await the release of the closely-watched US monthly employment data, due later during the early North American session. The popularly known NFP report will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Nevertheless, spot prices remain on track to register modest gains for the third successive week. Moreover, the aforementioned fundamental backdrop favours bulls and supports prospects for a further appreciating move.

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