- GBP / USD made a modest recovery from multi-week lows amid subdued demand from the USD.
- COVID-19 jitters, risk aversion, and a rally in US bond yields helped limit USD losses.
- A combination of factors acted as a headwind for the GBP and limited gains for the pair.
The pair GBP/USD it rose throughout the middle of the European session and hit new daily highs around the 1.3765-70 region in the last hour.
Having found some support near the 1.3725 zone, GBP / USD gained some traction on Wednesday and recovered some of the overnight dip to the lowest level since July 23. This marked the first day of a positive move in the previous three and was supported by a modest pullback in the US dollar from multi-month highs.
Incoming economic data from the US indicated that the US consumer has become more cautious in response to the latest spike in COVID-19 cases. This forced investors to lower their expectations of an early Fed policy tightening, which, in turn, was seen as a key factor that kept USD bulls on the defensive.
That said, a rally in US Treasury yields and the prevailing climate of risk aversion acted as a tailwind for the safe-haven dollar. Concerns about the possible economic fallout from the fast-spreading Delta variant of the coronavirus, along with political tensions in Afghanistan, continued to weigh on investor sentiment.
Apart from this, a combination of factors prevented investors from placing aggressive bullish bets around GBP / USD and limiting gains. Concerns that UK job losses will rise after the licensing scheme ends in September and Wednesday’s softer UK consumer inflation figures for July could undermine the British pound.
Furthermore, investors also preferred to wait on the sidelines before the release of the Minutes of the FOMC meeting. Market participants will be looking for clues as to when the Fed will begin to reduce its asset purchases, which will influence short-term USD price dynamics and provide further directional momentum to the GBP / USD pair.
Technical levels
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