- GBP / USD is witnessing an intraday trend reversal from the two-week highs amid a modest rally in the USD.
- The optimistic US economic outlook and a softer risk tone boost some cash flows into the safe-haven USD.
- Rising expectations of an earlier-than-expected Fed rate hike support prospects for further gains in the USD.
The pair GBP/USD has been under some selling pressure during the European session on Tuesday and has fallen to new daily lows just below the 1.3850 level.
The pair has failed to capitalize on its initial rally to highs of more than two weeks and has encountered new sales near the 1.3920 area, pressured by a modest pickup in demand for the US dollar. Investors have remained optimistic about the US economic outlook amid the impressive pace of coronavirus vaccination and US President Joe Biden’s infrastructure spending plan of more than $ 2 trillion. .
The Upbeat US ISM Services PMI Monday it has added to the narrative of a relatively faster American economic recovery from the pandemic. This, in turn, has been seen as a key factor that has continued to prop up the USD. Apart of this, softer tone around US stock market futures It has also benefited the safe haven USD and put some downward pressure on GBP / USD.
Meanwhile, USD bulls appear unaffected by the current pullback drop in U.S. Treasury yields and have taken cues from the increased expectations of a Fed rate hike earlier than expected. Reflation trading has fueled expectations of a pickup in US inflation and has also raised doubts that the Fed will maintain ultra-low interest rates for a longer period.
The combination of factors, to a large extent, has countered optimism about the successful vaccine distribution program and the gradual reopening of the UK economy. This, in turn, suggests that the path of least resistance for the dollar continues to the upside and supports the outlook for the resumption of the recent GBP / USD pullback from the three-year highs set in February.
GBP / USD technical levels
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