- A combination of factors dragged GBP / USD back below 1.3800 on Thursday.
- Covid-19 concerns and Bailey’s comments acted as a headwind for the pound.
- The dollar remains strong in the market after the end of June and before the employment report.
GBP / USD slid below 1.3800 and fell to 1.37770, the lowest level since mid-April. The price tried to regain ground but remains close to the floor, under pressure.
The pair struggled to capitalize on its first rally of the European session to the 1.3835 area. Then the words of the Governor of the Bank of England (BoE), Andrew Bailey, speaking at the Mansion House in London, weakened the pound. Bailey refrained from offering signals that imply any kind of adjustment, reiterating that rising inflation is seen as temporary.
This comes amid concerns about the spread of the more contagious delta variant of the coronavirus, which coupled with a downward revision of the UK manufacturing PMI added further downward pressure on sterling. The PMI indicator stood at 63.9 for June, below the previous estimate of 64.2.
Another negative factor for the GBP / USD, is that the dollar is holding with some strength. Speculation that the Federal Reserve will tighten its monetary policy if price pressures continue to intensify are a supporting factor. Expectations were bolstered by recent comments from Dallas Fed Chairman Robert Kaplan, saying that they are seeing a rise in price pressures and would prefer to discuss a cut in the purchasing program before the end of the year. Also a rise in Treasury yields worked in favor of the dollar.
Traders are now looking forward to US economic data with ISM manufacturing and jobless claims. The focus will also be on the bond market and what happens on Wall Street. On Friday comes the June employment report, with non-farm payrolls (consensus: +690,000).
Technical levels
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