- Sustained buying around the USD limits the positive intraday movement of the GBP / USD pair.
- A pullback in US bond yields limits dollar gains and exerts some support.
- Brexit and COVID-19 issues, along with Fed optimism, support the prospects for a further decline.
The pair GBP / USD remains under pressure below 1.4000 level during the jeuves european session, at the lowest levels seen in six weeks.
The pair has seen some selling at the start of the European session and has fallen to the lowest level since May 7, although it has lacked a strong following. The drop is solely due to strong continuation buying around the US dollar, which has been supported by a sudden bullish shift from the Fed.
In fact, the Fed surprised investors, saying it could raise interest rates at a much faster rate than previously anticipated. The so-called dot chart indicated two rate hikes in late 2023 versus March’s projection of not increasing until 2024. Additionally, seven members expect a rate hike or more in 2022.
Meanwhile, the Fed’s optimistic shift decreased investor appetite for perceived riskier assets and has further benefited the safe-haven USD. However, a modest drop in US Treasury yields has prevented dollar bulls from opening aggressive positions and helped limit any further decline in GBP / USD.
That being said, any significant recovery still seems elusive amidst concerns about the confrontation between the EU and the UK over the Northern Ireland protocol. In the latest developments, UK Prime Minister Boris Johnson said on Wednesday that they will have to take steps to ensure post-Brexit trade between Britain and Northern Ireland is uninterrupted.
This follows the UK government’s decision to delay the deadline for the final phase of easing the blocking measures until July 19. The move dampened prospects for a strong UK economic recovery after the pandemic. This, in turn, could continue to act as a headwind for the British pound and limit gains for the GBP / USD pair.
Market participants are now looking forward to the US economic calendar, with the release of the Philadelphia Fed Manufacturing Index and initial weekly jobless claims. This, coupled with US bond yields and broader market risk sentiment, could influence USD price dynamics and provide some boost to GBP / USD.
Technical levels to observe
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
