- Pessimistic market sentiment benefits the safe-haven USD and puts pressure on GBP / USD.
- Upbeat UK jobs details do little to impress GBP bulls or provide significant boost.
The pair GBP / USD remains under pressure below the 1.3650 level, near multi-day lows, and has had a rather subdued reaction following upbeat UK employment details.
Following good price movements in both directions the day before, the pair encountered fresh selling on Tuesday and has retraced further from the 32-month highs around the 1.3745 region touched last week. A weaker tone in stock markets has fueled some safe-haven money flows to the US dollar., which has been seen as a key factor putting pressure on the GBP / USD pair.
The global risk sentiment was seen affected Monday after German data added to concerns about the economic consequences of the coronavirus pandemic. In addition, concerns are mounting about obstacles to US President Joe Biden’s $ 1.9 trillion stimulus plan. Apart from this, escalating tensions between the United States and China in the South China Sea have also further affected investor sentiment.
On the other hand, the British pound has not gotten any respite following the release of the optimistic UK jobs report. In fact, the change in the number of people claiming unemployment benefits was +7,000 in December, compared to estimates of +35,000 jobless claims from +38,100 the previous month.
Meanwhile, the UK unemployment rate rose to 5.0% from 4.9%, but was still better than expected from 5.1%. However, the data has done little to impress GBP bulls or provide a significant boost to GBP / USD. This, in turn, leaves the pair at the mercy of broader market risk sentiment and USD price dynamics.
Therefore, the market’s focus of attention will remain on this week’s key US risk events. The FOMC is scheduled to announce its monetary policy decision on Wednesday. This will be followed by the release of the preliminary fourth quarter GDP report. This, coupled with the US stimulus news, will boost the USD in the short term and could generate further directional momentum to the GBP / USD pair.
GBP / USD technical levels