- GBP / USD witnessed some selling on Thursday and extended its decline.
- The weakness derived from a strong rise in the EUR / GBP cross put pressure on the pair.
- A modest corrective decline in the USD extended some support and helped limit any further losses.
The pair GBP/USD it extended its steady intraday decline and fell to new weekly lows, around the 1.3740 area during the early days of the American session.
Following the good two-way price movements of the previous day, the GBP / USD pair encountered new offers on Thursday and extended this week’s rejection drop from the 1.3900 zone. The decline was solely sponsored by some crossover-driven weakness stemming from a strong rally in the EUR / GBP crossover, although a sharp pullback in the US dollar helped limit losses.
As investors digest the Minutes from Wednesday’s FOMC meeting, the USD witnessed profit-taking amid a sudden spike in demand for the shared currency. Aside from this, an extension of the recent decline in US Treasury yields and an unexpected rise in US Initial Weekly Unemployment Claims put some additional pressure on the dollar.
That said, signs that the Fed is moving toward gradually reducing its asset purchases earlier than anticipated could act as a tailwind for the USD. Minutes from the June FOMC meeting revealed that policymakers agreed that they should be prepared to act if inflation or other risks materialize, suggesting that discussions on phasing out QE could begin in the next few months.
This, coupled with the prevailing environment of risk aversion, could also extend some support to the dollar as a safe haven. Concerns about the economic consequences of the spread of the highly contagious Delta variant of COVID-19 affected global risk sentiment. This was evident by a red sea in equity markets, which tends to benefit traditional safe-haven currencies.
The fundamental context favors bearish traders and supports the prospects for further weakness. Some follow-up sales below oscillating monthly lows, around the 1.3730 region, will reaffirm the negative outlook and lead to some aggressive technical selling. GBP / USD could become vulnerable to pull back to test strong horizontal support at 1.3665.
Technical levels
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