GBP/USD extends gains amid fragile greenback

The GBP/USD pair edged higher during the early trading hours of the American session as the US Dollar Index came closer to 100, suggesting a broad-based USD sell off. As of writing, the pair was up 0.35% on the day at 1.2570.

Although no clear fundamental catalyst, other than the weak Empire State Manufacturing Index, could be seen causing a USD sell-off, the American traders might be responding to last Friday's inflation figures as they came back from a long weekend. Besides, the major equity indexes in the U.S. opened higher on Monday, suggesting a relatively increased risk appetite, which could be helping the cable find some demand.

Jim Bullard, the president and CEO of the Federal Reserve Bank of St. Louis, shared his views on the monetary policy in a podcast and argued that the Fed's policy wasn't coherent and said that he could be persuaded to make one move (rate hike) or so.

Despite the recent fall, the US Dollar Index is holding above the significant 100 mark. A decisive break below that level might require a fundamental development that puts further pressure on the greenback.

Technical outlook

The pair could meet the immediate hurdle at 1.2615 (Mar. 27 high) before 1.2700 (psychological level) and 1.2775 (Dec. 6 high). On the downside, a break below 1.2500 (psychological level) could aim for 1.2450 (Apr. 6 low) and 1.2395 (100-DMA).

• GBP/USD next target remains at 1.2615 – UOB