- A broad-based USD strength sparked some selling around GBP / USD on Wednesday.
- The positive ADP report continued to support the strong offered tone surrounding the USD.
- A modest drop in US bond yields capped the dollar and helped limit the pair’s losses.
The pair GBP/USD managed to rally around 35-40 pips from daily lows and was last seen trading near the 1.3580 region, still below 0.30% for the day.
The pair witnessed some selling on Wednesday and broke four consecutive days of the winning streak to one-week highs, around 1.3650 touched in the previous session. A combination of factors brought the US dollar back toward its one-year highs, which, in turn, was seen as a key factor that put downward pressure on the GBP / USD pair.
Investors appear to be convinced that the Fed would begin to reduce its bond purchases starting in November. Markets may also have begun to assess prospects for a rate hike in 2022 amid concerns that the recent surge in crude oil and energy prices will fuel inflation. This, coupled with the risk aversion momentum, continued to prop up the dollar as a safe haven.
Concerns that a faster-than-expected rise in inflation could derail the global economic recovery weighed on investor sentiment. Added to this, fragile trade ties between the United States and China, the China Evergrande debt crisis, and a stagnation on the U.S. debt ceiling triggered a new wave of risk-off trade and led to a sharp decline in markets. of values.
On the economic data front, the ADP report showed that US private sector employers added 568,000 jobs in September compared to 428,000 anticipated and the prior month’s revised downward reading of 340,000. However, this was offset by a modest pullback in US Treasury yields, which limited gains for the USD and helped limit deeper losses for the GBP / USD pair.
However, it remains to be seen if the bulls can capitalize on the move or if the recovery attempt is met with new offers at higher levels. Therefore, it will be prudent to wait for a sustained move past the daily swing highs, around the 1.3625 region before positioning for any further appreciation moves for the GBP / USD pair.
Technical levels
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