GBP/USD bulls keep the reins above 1.2600 as US inflation, BoE and UK GDP loom

• GBP/USD seesaws around one-year high after posting third weekly gain.
• Upbeat UK data teases strong BoE rate hike and allow Cable buyers to remain hopeful.
• Fed’s dovish hike, fears emanating from US banking and debt ceiling issues weigh on US Dollar despite NFP-led bounce.
• UK markets are off on Monday, BoE, preliminary UK Q1 GDP and US CPI eyed for the week.

GBP/USD makes rounds to the highest level in a year, steady near 1.2635 during early hours of Monday morning in Asia.

Even so, the Cable pair buyers occupy the driver’s seat as the key week comprising the Bank of England (BoE) Monetary Policy Meeting, UK Gross Domestic Product (GDP) for the first quarter (Q1) of 2023 and the US Consumer Price Index (CPI) for April loom. That said, the pair buyers cheered broadly upbeat UK activity data and the US Federal Reserve’s (Fed) dovish rate hike, as well as broad US Dollar weakness, in that last week.

US Dollar Index (DXY) dropped for the third consecutive week despite paring some of the losses on Friday’s upbeat US jobs report for April. It’s worth noting, however, that the latest hawkish comments from a Fed officials and negative developments around the US banking and debt ceiling issues seem to challenge the GBP/USD bulls amid holiday in the UK.

On Friday, the US employment report for April surprised markets by unveiling a jump in the headline Nonfarm Payrolls (NFP) by 253K expected and revised down prior readings of 165K. Further, the Unemployment Rate also eased to 3.4% versus 3.5% market forecasts and previous mark whereas Average Hourly Earnings improved to 4.4% YoY from 4.3% prior (revised) and analysts’ estimations of 4.2%.

Following the upbeat US employment report, St. Louis Federal Reserve President James Bullard, who supported the 25 basis point rate hike that the Fed took last week, called it "a good next step." The policymaker cited significant amount of inflation in the economy and "very tight" labor market to back his hawkish bias.

On a different page, US Treasury Secretary Janet Yellen on Sunday issued a stark warning that a failure by Congress to act on the debt ceiling could trigger a "constitutional crisis" that also would call into question the federal government's creditworthiness, per Reuters. Elsewhere, US Senior Loan Officer Opinion Survey on Bank Lending Practices is up for release during the week and will be eyed for banking crisis.

At home, the final readings of the UK’s S&P Global/CIPS Services PMI rose past 54.9 initial forecasts to 55.9 for April while the Composite PMI also increased to 54.9 versus 53.9 flash estimations for the said month.

Against this backdrop, Wall Street ended the week on the positive side while the US Treasury bond yields bounced back.

Moving on, BoE’s ability to convince hawkish bias amid upbeat inflation and activity data will be the key for the GBP/USD pair traders to watch for clear directions.

Technical analysis

A clear upside break of a one-month-old resistance line, now immediate support around 1.2590, directs GBP/USD towards crossing the previous yearly high of near 1.2665.