GBP/USD struggles to hold above 1.2600 as USD gains momentum

The GBP/USD pair reached its highest level since June 2022, but failed to sustain the momentum. Despite a modest intraday uptick, the pair struggled to maintain its position near the 1.2600 mark and retreated during the early European session. Currently, spot prices are trading just above the mid-1.2500s and have remained mostly unchanged for the day. The pair is expected to experience a retracement, with the 38.2% and 61.8% Fibonacci levels serving as potential areas of support around 1.2520 and 1.2530. If the price drops below the 78.6% Fibonacci level, a reversal may be in store for the Cable.

The Greenback has seen some gains, as it recovers from its intraday losses and bounces back from a one-week low. This rebound in the USD has acted as a headwind for the GBP/USD pair. Investors are showing caution due to the looming recession risks, which have also affected the equity markets. This has led to a safe-haven bid for the USD. Despite this, the USD's gains are being capped by declining US bond yields and the Fed's less hawkish outlook.