- A combination of factors triggers some aggressive selling around GBP / USD on Friday.
- A good recovery in US bond yields revives demand for the USD and puts pressure on the pair.
- Concerns about AstraZeneca’s vaccine for COVID-19 weigh even more heavily on the British pound.
A sudden spike in USD demand has dragged the GBP / USD to the 1.3670 region, at two-month lows, at the start of the European session. At time of writing, the pair is recovering slightly to the e 1.3695-1.3700 region, still negative on the day.
As investors assimilated a stubbornly pessimistic Fed, the US dollar has seen a solid rebound from lows of more than two weeks amid a good recovery in US Treasury yields This, in turn, has been seen as a key factor that has sparked some aggressive selling around the GBP / USD pair during the first half of trading action on Friday.
It is worth mentioning that the Fed, in the minutes of the last FOMC meeting on Wednesday, reiterated its commitment to extend support for monetary policy until recovery is more certain. Additionally, Fed Chairman Jerome Powell said Thursday that the stance would only change after a few consecutive months of positive data.
On the other hand, St. Louis Fed Chairman James Bullard said that the central bank shouldn’t even discuss the changes until there are clear signs that the pandemic is over. That said, investors remain convinced that a relatively faster US economic recovery could force the Fed to raise interest rates sooner rather than later.
The optimistic US economic outlook has remained Backed by Impressive Coronavirus Vaccination Pace and US President’s Infrastructure Spending Plan., Joe Biden. This has fueled speculation about a pickup in US inflation and raised doubts that the Fed will keep interest rates ultra-low for a longer period.
The British pound has also come under pressure from concerns over a possible link between AstraZeneca’s coronavirus vaccine and a blood clotting disorder. The UK medical regulator issued a temporary ban on the vaccine for the age group under 30 and the trial in children has been halted, which could delay the UK government’s plan to reopen the economy.
Apart from this, the last leg of the sudden drop of the last hour could be attributed to some technical selling below the round 1.3700 level. The GBP / USD pair, for now, appears to have found some support near the 100-day SMA, which if broken will set the stage for an extension of this week’s sharp retracement from levels beyond 1.3900.
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.
