- GBP / USD finds new selling on Tuesday and returns the modest gains of the previous day.
- Nervousness over COVID-19 and Brexit issues act as a headwind for the pair amid modest USD strength.
- Falling US bond yields could limit the dollar’s rise and help limit the pair’s losses.
The pair GBP/USD remains under pressure during the European session on Tuesday, holding close to daily lows around the 1.4130-35 level.
A combination of factors has not helped the GBP / USD to capitalize on the gains recorded during the last two trading days and has led to new selling on Tuesday. The pair one more time has started to retreat from near the 1.4200 level and now it has reversed the positive movement of the previous day.
The pound sterling has come under pressure from doubts about the UK government’s plan to reopen the economy on June 21 in light of the spread of the so-called Delta variant of the covid. Aside from this, signs that Britain’s relationship with the European Union has been deteriorating has put additional downward pressure on the GBP / USD pair.
In a further escalation of the dispute over the Northern Ireland protocol, the EU is considering tougher retaliatory measures if the UK government fails to meet its post-Brexit obligations. This, coupled with a modest pickup in demand for the US dollar, has further contributed to the decline in the GBP / USD pair.
Friday’s weaker NFP release has dampened market expectations that the Fed could start reducing its asset purchases sooner rather than later. Having said that, investors remain concerned about mounting inflationary pressure. This, in turn, has prevented investors from opening aggressive bearish positions around the USD.
Apart of this, a softer tone in the stock markets it has been considered another factor that has lent some support to the safe-haven US dollar. However, the current decline in US Treasury yields could limit any significant gains for the USD and help limit deeper losses for the GBP / USD pair, at least for now.
There is no major macroeconomic data release from the UK on Tuesday, while the US economic calendar features second-tier releases such as JOLTS trade balance figures and job vacancies. The data is unlikely to provide a significant boost, leaving the USD at the mercy of US bond yields and overall market risk sentiment.
GBP / USD technical levels
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