- GBP / USD witnessed some selling for the third consecutive session on Wednesday.
- The nervousness of COVID-19 weighed on risk sentiment and benefited the dollar as a safe haven.
- The withdrawal of US bond yields capped the USD and helped limit the pair’s slide.
The pair GBP/USD it remained depressed for the middle of the European session, although it has managed to bounce a few pips from the one-week lows, around 1.3750 touched earlier this Wednesday.
The pair extended its retracement decline from the vicinity of 1.39000, or swinging highs after the NFP figures, and witnessed some selling for the third day in a row amid sustained buying interest in US dollars. The recent strong rally in US Treasury yields continued to act as a tailwind for the dollar, which received an additional boost thanks to a generally softer risk tone.
Concerns that the resurgence of COVID-19 cases could derail the global economic recovery dampened investor appetite for perceived riskier assets and drove flows into traditional safe-haven assets. The global flight to safety triggered a modest pullback in US bond yields, limiting USD gains and helping GBP / USD find some support near 1.3750.
Meanwhile, the UK and the EU remain at odds on the way forward for the Northern Ireland Protocol. This, coupled with British Prime Minister Boris Johnson’s plans to introduce a new 1.25% health and social care tax on earned income, continued to act as a roadblock to the British pound. This, in turn, should contain any significant rally for the GBP / USD pair.
There is no major market-moving economic data released on Wednesday, neither from the UK nor from the US However, a speech scheduled by New York Fed Chairman John Williams along with yields of US bonds could influence USD price dynamics. Apart from this, the broader market risk sentiment could generate some trading opportunities around the GBP / USD pair.