- GBP / USD gains some positive traction on Thursday, although it lacks any continuation.
- Brexit-related uncertainties act as a headwind for the British pound and limit the pair’s gains.
- The fundamental backdrop favors USD bulls and supports prospects for a further decline.
The pair GBP/USD retreats from daily highs at the start of the euopean session on Thursday after failing to find acceptance above the 1.3300 level.
The pair gained some positive traction during the early part of the trading action on Thursday and for now, it appears to have broken a three-day losing streak in a row. A rally in Asian equity markets weighed on the safe-haven US dollar and extended some support to the GBP / USD pair, although any significant rally still seems elusive.
The stalemate between the UK and the EU on the Northern Ireland Protocol and the worsening controversy over post-Brexit fishing rights between France and Great Britain could continue to act as a headwind for the British pound. Apart from this, the prospects for a more aggressive tightening of monetary policy by the Fed favor the bulls of the USD and help to limit the gains of the GBP / USD pair.
In fact, money markets began to price in the possibility of at least a 50 basis point rate hike by the end of 2022 in reaction to upbeat comments from Fed Chairman Jerome Powell. Testifying before Congress for a second day on Wednesday, Powell reiterated that the US central bank is likely to accelerate the reduction of its asset purchases.
In the meantime, concerns about the economic consequences of detecting a new variant of coronavirus vaccine resistant should limit any optimistic movement in the markets. Market concerns were further exacerbated after US officials said the most transmittable omicron vairant had been found in the country.
The fundamental backdrop supports prospects for an extension of the recent downward trajectory, although the lack of strong sales continuation warrants some caution. There is no major economic release from the UK on Thursday, leaving GBP / USD at the mercy of USD price dynamics.
Later, at the start of the American session, investors will take cues from the publication of initial weekly jobless claims and speeches from a number of influential FOMC members. This, coupled with broader market risk sentiment, will boost USD demand and could generate some short-term trading momentum for GBP / USD.
GBP / USD technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
