GBP / USD rallies rapidly from daily lows, remains below 1.3500 level

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  • GBP / USD is witnessing some intraday selling on Monday, although it lacks follow-up.
  • A combination of factors acts like a tailwind for the USD and puts some pressure on the pair.
  • A pessimistic BoE and Brexit concerns weigh on the British pound and contribute to the pair’s selling bias.
  • The recovery attempt from 1.3450 risks ending quite quickly.

The pair GBP/USD It has quickly recovered around 50 pips from the daily lows of 1.3450, although it has remained limited by the key psychological level of 1.3500.

The US dollar started the new week on a positive note amid a solid rally in US Treasury yields. Despite the pessimistic outlook from the Fed, investors seem convinced that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. Apart from this, the cautious market sentiment further supported the safe haven USD and put some downward pressure on the GBP / USD pair.

Secondly, sterling was weighed down by the Bank of England’s surprise decision last week to keep interest rates stable. This comes after concerns that the UK government will activate Article 16 of the Northern Ireland Protocol, which further acted as a headwind for the British pound. The GBP / USD pair, however, managed to find decent support near 1.3450, although the recovery attempt lacked any bullish continuation conviction.

The fundamental backdrop appears firmly tilted in favor of the bears and any subsequent move to the upside could still be seen as a selling opportunity.

There is no major economic data release on Monday, not from the UK or the US. This makes it prudent to wait for sustained strength beyond the 1.3500 level before confirming that the GBP / USD may have bottomed out and positioning yourself for any further bullish movements.

Later during the US session, investors will take cues from Fed Chairman Jerome Powell’s comments at an online conference. This, coupled with US bond yields and broader market risk sentiment, will drive demand around the USD. Apart from this, comments from BoE Governor Andrew Bailey will influence GBP and provide some boost to GBP / USD. The key focus, however, will remain on Wednesday’s release of the latest US consumer inflation figures.

GBP / USD technical levels


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