- Sustained buying in USD triggers some selling around GBP / USD on Thursday.
- The drop appears limited ahead of Fed Chairman Jerome Powell’s speech.
The pair GBP/USD it has rapidly retreated around 35-40 pips from the initial highs of the European session and has fallen to new daily lows, around the region of 1.3930-25, where it appears to be consolidating ahead of Fed Chairman Jerome Powell’s speech.
The pair has struggled to capitalize on its intraday rally and has encountered new sales near the 1.3965-70 region, pressured by buying interest around the US dollar. Investors have remained optimistic about the prospects for a US economic recovery relatively stronger amid progress on COVID-19 vaccines and a massive US fiscal spending plan The optimistic US economic outlook has continued to prop up the USD, which in turn has been seen as a key driver which has put some pressure on the GBP / USD pair.
Meanwhile, reflation trading has fueled expectations of a possible pickup in US inflation and has raised doubts that the Fed will maintain an ultra-low interest rate for a longer period. This, coupled with cautious sentiment in equity markets, has further benefited the dollar’s relative safe-haven status against the British pound. That said, a modest pullback in Treasury yields has prevented USD bulls from opening aggressive positions and has helped limit any further losses to the GBP / USD pair, at least for now.
The pound sterling has also been supported by the expectations that the UK government’s plan to end lockdown restrictions by June 21 would lead to a rapid economic recovery. That said, the lack of significant buying interest and the repeated unsuccessful attempts to recover above the key psychological level of 1.4000 suggest that the positive news is already fully discounted in price. Therefore, any attempt to move higher runs the risk of fading fairly quickly.
That said, investors could refrain from opening aggressive positions and would rather wait on the sidelines. before Fed Chairman Jerome Powell’s scheduled speech, later during the American session. Powell’s comments on the risk of rapidly rising long-term borrowing costs will boost US bond yields and influence USD price dynamics. This could generate some short-term opportunities around GBP / USD.
GBP / USD technical levels
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