- GBP / USD is rejected around 1.3500 / 05 and sees a pullback on Thursday.
- Resurgent demand for USD put pressure amid the worsening COVID-19 situation in the UK.
- Britain reported a record number of cases amid an alarming spread of the Omicron variant.
GBP / USD rose to a month-long high at 1.3505 at the start of the Asian session. In the last hours, the pair has fallen 50 pips, bottoming out at the daily low 1.3454.
The pair struggled to find acceptance above the key psychological mark of 1.3500 and witnessed a modest setback from the highest level reached since Nov. 19 touched earlier this Thursday. The US dollar made a solid rally and reversed a significant portion of yesterday’s losses. This, coupled with the worsening Covid-19 situation in the UK, attracted some selling around the GBP / USD pair.
The greenback drew some support from the rise in US Treasury yields, which followed soft demand for a $ 56 billion seven-year bond auction. In fact, the yield on the 10-year US government bond soared to 1.56% for the first time since November 29. In addition to this, the optimistic outlook from the Fed pushed the two-year yield to its highest level since March 2020 and provided a good boost to the greenback.
Meanwhile, Britain reported a record 183,037 new COVID-19 cases on Wednesday, which could force the government to impose further restrictions. It’s worth remembering that UK Prime Minister Boris Johnson had said last week that ministers would keep the latest data under constant review to see if additional stricter measures are needed. This was seen as another factor that acted as a headwind for the British pound.
However, it remains to be seen whether the GBP / USD pair is able to attract some lower level buying or the decline marks the end of the recent strong recovery from the yearly low hit earlier this month.
Market participants are now waiting for US data for a new boost, with the usual weekly jobless claims and the Chicago PMI. This, along with US bond yields, will influence price dynamics.
Technical levels
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