- GBP / USD is witnessing some selling for the third day in a row on Tuesday.
- Vaccine fears weigh on investor sentiment and benefit safe-haven USD.
- Weaker US bonds limit strong USD gains and help limit losses on GBP / USD.
- Investors expect US retail sales to build some momentum ahead of the FOMC and the BoE.
The pair GBP/USD maintains its sales tone during the European session on Tuesday, although has managed to bounce more than 40 pips from the one-week lows. The pair remains around 1.3855, still losing around 0.28% on the day.
The pair has extended last week’s rejection drop, from the key psychological level of 1.4000, and has continued to lose ground for the third day in a row on Tuesday. Investors have become Cautious Following Discontinuation of Oxford / AstraZeneca Coronavirus Vaccine in Several European Countries. This, in turn, has benefited the safe-haven US dollar and put some pressure on the GBP / USD pair.
The dollar has been supported by the optimistic economic outlook of the United States, reinforced by the approval of a massive $ 1.9 trillion stimulus package. That said, a softer tone around US Treasury yields has prevented USD bulls from opening aggressive positions. This has been seen as the only factor that has helped the GBP / USD to find some support above the 1.3800 level.
The expectations of a relatively faster US economic recovery they have forced investors to begin pricing in a possible spike in US inflation. This has raised doubts that the Fed would keep interest rates ultra-low for a longer period and has pushed the yield on the benchmark 10-year US government bond to one-year highs, at levels just above the 1.60% reached the last week.
However, expectations that the Fed could take some action to stem the recent sharp rise in the cost of borrowing in the long run they have provided respite for bond traders and led to a modest decline in US bond yields. Therefore, the key focus of attention will remain on this week’s key central bank events: the FOMC’s monetary policy decision on Wednesday and the Bank of England meeting on Thursday.
Meanwhile, market participants are likely to follow the cues from Tuesday’s release of US monthly retail sales data. Apart from this, US bond yields could influence USD price dynamics. and generate some short-term trading opportunities around the GBP / USD pair.
GBP / USD technical levels
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