GBP/USD advances to fresh weekly high in mid-1.3100s amid notable USD supply

• GBP/USD draws buyers for second straight day amid Fed-inspired USD weakness.
• Expectations that the BoE will cut rates less than the Fed are also contributing to the positive move.
• Bulls may now opt to sit on the sidelines ahead of the Fed and BoE meetings next week.

The GBP/USD pair is gaining positive traction for the second day in a row and is still recovering from a more than three-week low around the psychological 1.3000 level reached on Wednesday. Momentum is lifting spot prices to the mid-1.3100s or a fresh weekly top during the Asian session and is supported by the strong tone offered around the US dollar (USD).

The USD Index (DXY), which tracks the greenback against a basket of currencies, falls to a more than one-week low amid growing bets for more interest rate cuts by the Federal Reserve (Fed), the Index claimed US producer prices, weaker (PPI) report than Thursday. Dovish Fed expectations are keeping US Treasury yields down near 2024 lows, which along with bullish market sentiment is undermining the safe-haven dollar and acting as a tailwind for GBP/USD.

Meanwhile, bulls appear unfazed by bets for more interest rate cuts from the Bank of England (BoE), especially after data released this week pointed to a slowdown in UK wage growth and a flat GDP print for the second consecutive month in July. Markets, however, believe the BoE will loosen policy less than the Fed over the next year. This in turn benefits the British Pound (GBP) and is proving to be another factor providing further support to the GBP/USD pair.

It remains to be seen, however, whether the bulls can capitalize on the move or refrain from placing aggressive bets ahead of the key risks of next week’s central bank event. The Fed is scheduled to announce its policy decision at the end of a two-day policy meeting next Wednesday. This will be followed by the crucial BoE meeting on Thursday, which will play a key role in providing significant impetus to the GBP/USD pair and determining the next stage of a directional move.