- GBP / USD saw some buying mid-range 1.3400 amid renewed USD selling.
- The prevailing risk-taking environment acted as a headwind for the USD as a safe haven.
- Recovering US bond yields could stem the USD’s slide and limit GBP gains.
- A dovish BoE and Brexit fears could further deter the bulls from taking aggressive positions.
GBP / USD continued to climb above the key psychological level of 1.3500 and rebounded from its daily highs at the start of the North American session. The pair was last traded in the 1.3530-35 range, rising nearly 0.30% for the day.
The pair regained momentum after breaking mid-day to the mid-range of 1.3400, building on Friday’s rally that rose from five-week lows in response to the positive US NFP report were achieved, loomed. The bullish sentiment in the financial markets weakened the safe haven US dollar, which in turn was seen as a key factor in a slight upturn in the major currency pair.
The passage of the long-delayed $ 1 trillion infrastructure bill added to optimism about global economic growth and was a key factor in boosting investor confidence. Still, a solid rise in US Treasury yields should limit the USD’s losses. This, combined with Brexit concerns, could limit a further rise in the GBP / USD currency pair.
The Fed maintained its temporary inflation statement last week, hinting that policymakers were in no rush to hike borrowing costs. However, market participants seem convinced that the US Federal Reserve would be forced to adopt more aggressive policies to contain persistently high inflation. This was seen as a key factor behind the rise in US bond yields.
Meanwhile, investors remain concerned that the UK government will trigger Article 16 of the Northern Ireland Protocol. Also, last week’s surprise decision by the Bank of England to keep rates unchanged could deter cops from making aggressive bets on the pound sterling. The GBP / USD currency pair should therefore be treated with caution before positioning itself for further upward movement.
With no major market-moving economic data to be released on Monday, traders will look to Fed Chairman Jerome Powell’s comments at an online conference. This, along with US bond yields and general risk sentiment in the market, will drive USD demand. That being said, BoE Governor Andrew Bailey’s comments will affect the GBP and add some boost to the GBP / USD currency pair.
Technical levels to be observed
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