- GBP / USD draws some buying near 1.3450 amid a renewed sell off around the USD.
- Risk appetite acts as a headwind for the safe-haven USD.
- The rally in US bond yields could limit the dollar’s slide and limit the pair’s gains.
- The nervousness of the BoE and around Brexit could limit the aggressive entry of the bulls.
The pair GBP / USD has risen above the key psychological level of 1.3500 and has reached new daily highs at the start of the North American session. At the time of writing, the pair is trading around the 1.3540 region, up more than 0.30% on the day.
After an intraday drop to the 1.3450 region, GBP / USD gained some positive traction and built on Friday’s recovery move from five-week lows touched in reaction to the upbeat US NFP report. Underlying bullish sentiment in financial markets weighed on the safe-haven US dollar, which in turn was seen as a key factor that provided a good boost to the upside in the pair.
The passage of a $ 1 trillion US infrastructure bill The long overdue added to the optimism about global economic growth and turned out to be a key factor boosting investor sentiment. That being said, a solid rally in US Treasury yields it should limit USD losses. This, coupled with nervousness around Brexit, could limit any further gains for the GBP / USD pair.
The Fed last week stuck to its transitory inflation narrative and indicated that authorities they were in no rush to increase borrowing costs. Market participants, however, seem convinced that the US central bank would be forced to adopt a more aggressive response to contain stubbornly high inflation. This was seen as a key factor pushing US bond yields higher.
Meanwhile, investors continue concerned that the UK government will activate Article 16 of the Northern Ireland Protocol. Apart from this, the surprise decision by the Bank of England last week to keep interest rates stable could further prevent the bulls from opening aggressive positions around the British pound. This warrants some caution before positioning for any further bullish movement in the GBP / USD pair.
In the absence of major economic releases on Monday, investors will take the cue from Fed Chairman Jerome Powell’s comments at an online conference. This, coupled with US bond yields and broader market risk sentiment, will drive demand around the USD. Apart from this, comments from BoE Governor Andrew Bailey will influence GBP and could provide some boost to GBP / USD.
GBP / USD technical levels
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