- A combination of factors puts pressure on GBP / USD for the second day in a row.
- The prevailing sentiment of risk aversion continues to drive some money flows into the safe haven USD.
- The imposition of new restrictions due to the coronavirus in the United Kingdom further affects the British pound.
The pair GBP/USD remains on the defensive during Thursday’s European session, falling below the 1.3650 region. At time of writing, the pair is trading around the 1.3645 level, recovering slightly from its daily low of 1.3630.
The pair has extended the sharp retracement drop of the previous day, from the 1.3755-60 region to new 32-month highs, and has seen some continuation sales for the second day in a row on Thursday. He prevailing sentiment of risk aversion it has continued to drive some cash flows into the safe haven US dollar, which has been seen as one of the key factors putting pressure on the GBP / USD pair.
Since many positive news were already priced into the markets, investors have become cautious amid doubts about the timing and size of a new US stimulus package. Apart from this, a pessimistic FOMC acted as a catalyst That sparked some aggressive selling in the stock markets. The Fed expressed concern about the pace of the recovery amid the continued rise in coronavirus cases.
On the other hand, the pound sterling has been pressured by growing concerns about potential economic consequences of the imposition of new restrictions in the United Kingdom. In fact, the UK government announced new measures to restrict travel from 22 high-risk countries. In addition, Prime Minister Boris Johnson indicated that the lockdown due to COVID-19 would last until March 8.
Meanwhile, GBP / USD has now approached weekly lows, near the 1.3610 region touched on Tuesday. Sustained weakness below this region could be seen as a further trigger for bears and pave the way for an extension of the current corrective decline. The pair could become vulnerable and fall towards the key psychological level of 1.3500.
Market participants now await the release of the US Fourth Quarter GDP Advanced Report., which will be announced at the beginning of the American session. This, along with broader market risk sentiment, will play a key role in influencing USD price dynamics. Apart from this, developments around the coronavirus saga could generate even more short-term opportunities around the GBP / USD pair.
GBP / USD technical levels
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