- GBP / USD is struggling to preserve early gains and is back around 50 pips from the highs.
- Concerns about the economic impact of COVID-19 prevent bulls from opening new positions.
- A modest pickup in USD demand puts some additional pressure on the pair.
The pair GBP / USD has fallen around 50 pips from intraday highs and has now fallen to the lower end of its daily range, around the 1.3675 region.
The pair has not been able to capitalize on its initial rise and has found new sales near the region of 1.3720-25, may now be looking to extend its pullback from the highest level since May 2018. The British pound was seen hit by disappointing UK macro data on Friday (retail sales and PMI figures) which added to concerns about a slowdown in economic activity.
This, coupled with news that the new UK variant was not only highly infectious but perhaps more lethal, has prevented GBP bulls from opening new positions and limited the rise of the GBP / USD pair. Apart from this, concerns about the possible economic consequences of the increase in the number of coronavirus cases the safe-haven US dollar has benefited from the British currency.
Having said that, expectations that a massive fiscal stimulus in the US boost the global economic recovery could limit any significant rise for the dollar. This makes it prudent to wait for a strong continuation sell, possibly below Friday’s lows around the 1.3635 region, before confirming that the GBP / USD has peaked in the near term.
There is no major economic data release on Monday, either from the UK or the US Therefore, developments around the coronavirus saga will play a dominant role in driving broader market risk sentiment and influence USD price dynamics. Apart from this, Investors could turn their attention to a scheduled speech by Bank of England Governor Andrew Bailey.
However, the key focus will be on the FOMC’s latest monetary policy decision on Wednesday. This will be followed on Thursday by the release of the preliminary US fourth quarter GDP report, which should provide a new directional boost to the dollar and help determine the short-term movement of the GBP / USD.
GBP / USD technical levels
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