- GBP / USD rallied over 85 pips in reaction to aggressive comments from Saunders from the Bank of England.
- The nervousness of COVID-19 benefited the safe-haven dollar and limited the rise for the pair.
The pair GBP/USD it spiked to the 1.3900 zone, or new daily highs in the past hour, although it quickly lost a few pips thereafter. The pair was last seen trading just above 1.3850, almost unchanged for the day.
Following an early drop to the 1.3815-10 region, the GBP / USD pair witnessed a dramatic turnaround on Thursday and recovered closer to the upper end of its weekly trading range. The strong intraday rally of around 85 pips was sponsored by aggressive comments from Bank of England member Michael Saunders. During a scheduled speech at an online event, Saunders said the question of whether to reduce our current asset purchase program sooner will be considered at our upcoming meetings.
This comes on the back of Wednesday’s hotter-than-expected UK CPI report and mostly optimistic UK monthly employment details released earlier this Thursday. The events fueled speculation that the Bank of England will consider cutting its massive stimulus program sooner, which, in turn, prompted an aggressive short-hedging move around GBP / USD. That being said, the emergence of some US dollar purchases prevented the bulls from positioning for further gains and limited any significant gains for the pair.
As investors took in the dovish testimony from Fed Chairman Jerome Powell on Wednesday, a generally weaker risk tone turned out to be a key factor that benefited the dollar as a safe haven. Concerns about the spread of the highly contagious Delta variant of the coronavirus continued to weigh on investor sentiment and affected global risk sentiment. This was evident by a sharp decline in US equity futures, which helped offset an extension of the sharp decline in US Treasury yields.