GBP/USD consolidates in a range below mid-1.3800s
|- GBP/USD struggled for a firm direction on Monday and remained confined in a range.
- A broad-based USD strength was seen as a key factor capping the upside for the pair.
The GBP/USD pair extended its sideways consolidative price action through the mid-European session and remained confined in a range below mid-1.3800s.
The pair showed some resilience below the 1.3800 mark on Friday, albeit, so far, has struggled to register any meaningful recovery from near one-month lows. A broad-based US dollar strength was seen as a key factor that held bulls from placing bets and capped the upside for the GBP/USD pair.
Friday's stunning US jobs report for February reinforced the narrative of a strong sequential US economic recovery from the pandemic and continued lending some support to the USD. Apart from this, a fresh leg up in the US Treasury bond yields provided an additional boost to the greenback.
The US Senate on Saturday passed a much-awaited $1.9 trillion stimulus package and sparked another sell-off in the US fixed income market. This, along with expectations for an uptick in the US inflation, pushed the yields on the benchmark 10-year US bond back closer to 1.60%, or over one-year tops.
Meanwhile, the bond market rout raised fears of distressed selling in other asset classes. Adding to this, reports of attacks on Saudi Arabian oil facilities led to a cautious mood around the equity markets. This, in turn, extended some additional support to the safe-haven greenback.
On the other hand, the British pound found some support from the easing of coronavirus-induced lockdown measures in England. As the first step of a four-step plan, all schools reopened from March 8 and recreation in outdoor public spaces will be allowed between two people.
Meanwhile, the GBP/USD pair had a rather muted reaction to comments by the Bank of England Governor, Andrew Bailey. Speaking at a webinar this Monday, Bailey said that the economic outlook is positive and that we will see a rise in inflation in the short term.
There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US, leaving the GBP/USD pair at the mercy of the USD price dynamics. That said, the US bond yields and the broader market risk sentiment will influence the USD and produce some short-term trading opportunities.
Technical levels to watch
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