- GBP / USD is unable to retain and capitalize on its positive move to three-day highs early in the European session.
- Nervousness over Brexit offsets renewed selling around the USD and optimistic outlook for the UK economy, limiting the pair’s rise.
The pair GBP/USD has returned an upward movement at the start of the European session on Monday, to new three-day highs near 1.4120, and has quickly retraced below the 1.4100 level.
After a brief consolidation during the early part of trading action on Monday, the pair has regained traction and built on last week’s good rebound from the key psychological level of 1.4000. This marks the second day of positive movement and is due to the appearance of some new sales around the US dollar.
The dollar has been seen affected by disappointing US retail sales data. Friday, which have reaffirmed the Fed’s pessimistic view and forced investors to cut their expectations for a tightening of the Fed’s monetary policy ahead of schedule. This, coupled with the current drop in US Treasury yields, has acted as a headwind for the dollar.
Even a softer tone in the stock markets, amid concerns about the continued rise in new COVID-19 cases in Asia, has done little to offer support to the safe-haven US dollar. On the other hand, sterling has been supported by an optimistic economic outlook amid gradual easing of restrictions in the UK.
In fact, Britain has further relaxed restrictions on its economy and social contact, starting this Monday. Among other measures, people will be able to hug each other again and pubs and restaurants will be able to serve customers indoors. This has helped offset concerns about the Indian variant of the virus it spreads rapidly.
Having said that, Uncertainty over the post-Brexit deal in Northern Ireland has prevented bulls from opening aggressive positions around the GBP / USD pair. The news indicates that Ireland is increasingly concerned that British Prime Minister Boris Johnson wants to completely rewrite the Northern Ireland section of the Brexit deal.
In the absence of any major UK or US economic release, it is prudent to wait for some continuation buying before positioning for any further bullish movement. Meanwhile, market risk sentiment and US bond yields could influence USD price dynamics, which could provide some momentum.
GBP / USD technical levels
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