- GBP / USD drew some buying on the dips on Friday amid dovish USD price action.
- The risk appetite boost in the markets acted as a headwind for the dollar – safe haven.
- The rally in US bond yields sustained the USD and limited the pair’s rise.
The pair GBP/USD remained on the defensive during the early North American session, although it has managed to bounce around 30 pips from daily lows and was last seen trading around 1.3750.
The pair drew some buying on dips near the 1.3920 region and is now looking to take advantage of this week’s strong rally from levels below 1.3600, or the lowest level since February. As investors looked beyond the mixed numbers in the US macroeconomic data, a dovish action in the price of the US dollar was seen as a key factor that extended some support to the GBP / USD pair.
Data released earlier this Friday showed that major UK retail sales posted growth of 0.5% in June compared to 0.4% expected. This, however, was offset by a slight disappointment in sales that spiked motor fuel for automobiles, which rose a modest 0.3% during the reported month compared to consensus estimates for a 0.6% increase.
On the other hand, the report closely followed by IHS Markit showed that business activity in the UK manufacturing and services sector slowed significantly in July. The data fueled concerns about the pace of economic recovery from the pandemic amid a resurgence of cases in the UK and acted as a headwind for the British pound.
Investors, meanwhile, now seemed to have sidelined concerns about the rapidly spreading Delta variant of the coronavirus. This was evident by a generally positive tone in the equity markets. The risk appetite boost undermined the safe-haven dollar and helped GBP / USD find decent support near the 1.3720 area.
That said, a strong intraday rally in US Treasury yields helped cap deeper losses for the USD and limited gains for the GBP / USD pair. The USD moved shortly after the release of the better-than-expected US flash manufacturing PMI, which was largely offset by an unexpectedly sharp drop in the service sector indicator.
Now it will be interesting to see if the GBP / USD pair can capitalize on the attempted recovery move or continue its struggle to climb above 1.3800. However, the pair is still on track to end almost unchanged for the week.
Technical levels
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