- A combination of factors continues to lend some support to GBP / USD on Thursday.
- Optimism about a stronger economic recovery in the UK benefits the British pound.
- Powell’s pessimistic comments and bullish market sentiment weigh on the safe-haven USD.
After an initial rally to the 1.4170 region, the pair GBP/USD it has witnessed some selling and has quickly retraced around 50 pips. However, a combination of factors has helped limit any further decline and helped the pair to attract some shopping near the 1.4120 region. At the start of the European session on Thursday, GBP / USD returns to the region of daily highs.
The pound sterling has remained supported by the impressive speed of coronavirus immunization campaign and UK government plan to ease current lockdown measures. In fact, British Prime Minister Boris Johnson has already unveiled a new four-phase plan to end the restrictions by June 21.
The fact seems to have raised the hopes for a rapid UK economic recovery and it has clouded the prospects for any further rate cut by the Bank of England. This, coupled with the predominant selling bias of the US dollar, has continued to offer some support to the GBP / USD pair and could help limit any significant declines.
The USD has been pressured by pessimistic comments from the Fed chairman, Jerome Powell, who asserted that interest rates would stay low for a long time. Aside from this, the underlying bullish tone in financial markets has also weighed further on the safe-haven USD versus its British counterpart.
Investors remain optimistic about a strong global economic recovery amid progress in vaccines for COVID-19 and the $ 1.9 trillion stimulus package of US President Joe Biden. Reflation trading has continued to push US bond yields higher, although it has done little to provide a respite for the USD.
Having said that, overbought conditions on the daily chart could prevent bulls from opening aggressive positions. This, in turn, could limit any significant rally for the GBP / USD pair, at least for now, amid the absence of relevant economic releases from the UK.
At the start of the American session, a couple of important macroeconomic data from the US could influence the dynamics of USD prices and generate some short-term trading opportunities. In the US economic calendar, the publication of the second (preliminary) estimate of GDP for the fourth quarter and durable goods orders stands out.
GBP / USD technical levels