- GBP / USD balanced between tepid gains and minor losses throughout the middle of the European session.
- The optimistic UK economic outlook supported the British pound and helped limit the decline.
- A modest rally in the USD from multi-month lows limited any significant gains for the pair.
The pair GBP/USD it updated the daily highs in the last hour, although it quickly lost a few pips thereafter and found itself trading around 1.4150 heading into the American session.
The pair continued its two-way price movements for the third consecutive session on Wednesday and remained confined to a wider trading range held for the last week or so. In the absence of relevant economic data, investors preferred to stay on the sidelines and wait for a new catalyst before making new directional bets.
Meanwhile, the slide remains muffled amid optimistic prospects for the UK economy, bolstered by the impressive rate of vaccination against the coronavirus and the gradual relaxation of lockdown restrictions. In fact, the UK health service on Wednesday extended its COVID-19 age-based vaccination schedule to cover all people over the age of 30.
Commenting on the latest development, UK Health Secretary Matt Hancock said: ‘Our vaccination program is progressing at such a phenomenal rate and I am delighted that less than six months after Margaret Keenan received the first licensed vaccine in the world, now we can open the offer to all those who are thirty or more years old. “
This bodes well for the UK government’s plan to end the restrictions entirely on June 21, which, in turn, continued to act as a tailwind for the British pound. The support factor, to some extent, was offset by a modest rally in the US dollar from multi-month lows. This was seen as the only factor limiting the GBP / USD pair’s gains, at least for now.
Meanwhile, the USD rally could be attributed solely to some short hedging, which risks fading rather quickly amid dovish Fed expectations. Several FOMC officials eased concerns about runaway inflation, reiterating that any Rise in prices would be temporary, forcing investors to lower their bets for an early take-off.
The fundamental backdrop remains in favor of bull traders and supports the prospects for additional earnings. The positive outlook is reinforced by the emergence of some falling purchases in the vicinity of the 1.4100 mark. That said, it will still be prudent to wait for a sustained move past 1.4200 before positioning for any further appreciation moves.