GBP / USD at new weekly lows below 1.3550 as US dollar maintains gains

• The DXY consolidates the recovery from multi-year lows, eyes 90.00.
• GBP / USD is testing levels below 1.3550, looking vulnerable

He GBP/USD it fell further during the US session and fell to 1.3531, reaching the lowest level since December 30. It is under pressure, trading below the 1.3550 area which leaves the pound vulnerable to further losses.

Key Driver: US Dollar Rebound

The key factor on Thursday is the recovery of the dollar across the board. The DXY is up 0.35%, trading around 89.90, far from the two-year low that reached near 89.00 on Wednesday. Higher US yields continue to support the dollar. On Wall Street, the major indices hit new all-time highs.

Looking at economic data, initial US jobless claims fell to 78,000 in the week ending January 2, the lowest in five weeks. The ISM services sector index rose to 57.2 versus the expectation of a modest decline. The investor ignored the numbers. The official US employment report is due on Friday.

GBP / USD and the Bank of England

The GBP / USD pair has a negative bias in the short term, but the uptrend is intact in a broader perspective. Last week, it reached the highest level since 2018 and then found resistance at the 1.3700 area.

The rally appears to be losing steam, so far due to the strength of the US dollar. The main short-term challenges for the pound are related to monetary policy expectations in the UK and the pandemic. The latest COVID-19 report showed 52,000 new cases down from the 62,000 reported yesterday.

Analysts at MUFG Bank believe that the pound could continue to underperform during the first quarter of 2021 “as the Bank of England cuts rates and the UK economy suffers more than elsewhere. Assuming a successful vaccine rollout, GBP can rebound from the second quarter onwards. “

Technical levels