- GBP / USD is witnessing a trend reversal from the 1.4000 level amid resurgent demand for the USD.
- The rally in US bond yields benefits the USD and puts some pressure on the pair.
- Weaker UK macro data weighs on the British pound and contributes to the selling bias.
The pair GBP/USD has fallen to daily lows during the European session, with bears now targeting sustained weakness below the round 1.3900 level.
The pair has struggled to capitalize on this week’s strong positive move of around 200 pips and has faced rejection near the key psychological level of 1.4000 amid resurgent demand for the US dollar. US Treasury yields have resumed their rally on the last trading day of the week and have helped the USD regain positive traction.
Investors are still optimistic that the massive $ 1.9 trillion pandemic stimulus package would stimulate economic activity in the US. Reflation trading has re-fueled concerns about rising inflationary pressure and pushed the yield of the 10-year benchmark US bond back above 1.6%, close to the highs of more than a year touched last week.
Meanwhile, another sell-off in the US bond market is starting to make investors nervous. This has been evident by a sharp pullback in US equity markets, providing an additional boost to the safe-haven US dollar and has contributed to the intraday selling pressure around GBP / USD.
Apart of this, sterling has been further pressured by UK macroeconomic releases, mostly softer than expected, Friday. The Office for National Statistics has reported that the economy contracted 2.9% month-on-month in January. Added to this, UK industrial and manufacturing production fell 1.5% and 2.3%, respectively, during the reported month.
The fall has marked the first day of a negative movement of the previous four and has forced the GBP / USD pair to erase the positive movement of the previous day. Some continuation selling below the 1.3900 level will change the short-term bias in favor of the bears. and they will set the stage for a new intraday decline.
Friday’s US economic calendar features the second-tier releases of the Producer Price Index and Michigan’s Preliminary Consumer Sentiment Index. The data, along with US bond yields and broader market risk sentiment, will influence USD price dynamics and could generate some trading opportunities around the GBP / USD pair.
GBP / USD technical levels
.
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.
