GBP / USD bounces from 1.3860 helped by a decline in the US dollar

• The British pound among the worst performing currencies during the American session on Thursday.
• GBP / USD is slightly lower on the day, but is recovering from lows.

The GBP / USD has retraced to test the 1.3860 area where it has found support and rallied towards 1.3900. Still negative on the day, but downside momentum is waning as the US dollar weakens even more across the board.

The pound remains among the worst performing currencies in the markets on Thursday, affected by the Bank of England meeting. The central bank, as expected, kept its monetary policy unchanged and announced a slowdown in its purchases weekly that “should not be interpreted as a change in the orientation of monetary policy.”

“While the MPC made efforts to downplay the political implications, we believe that the Bank of England is now part of a subset of the major central banks that are taking a closer look at political exits. This potential divergence may be a slow story to unfold during the second half, but it should help prop up the British pound against other still pessimistic central bank-backed currencies.“Argued TD Securities analysts. They see room for a boost above 1.40 in GBP / USD, “but the US NFP jobs report and UK local election results come first.”

The US Dollar DXY Index is trading at 90.90, down 0.35% on the day to the lowest level in three days. The 10-year yield stands at 1,559%, about to test the weekly low that, if broken, could lead to an extension, further weakening the US dollar..

Economic data from the US beat expectations, with initial jobless claims falling below 500,000 for the first time since the pandemic. The data helped the dollar, only momentarily. The Fed’s Kaplan reiterated that he would like to start talking about phasing out the bond buying program at the FOMC sooner rather than later.

GBP / USD technical levels