- A strong pickup in the USD demand prompted some follow-through selling around GBP/USD.
- Hawkish Fed expectations, the recent spike in the US bond yields acted as a tailwind for the USD.
- The market focus now shifts to this week’s release of the US CPI and monthly Retail Sales figures.
The GBP/USD pair refreshed daily lows during the early North American session, with bears now looking to extend the downward trajectory further below the 1.3800 mark.
The pair extended Friday's sharp intraday retracement slide from the vicinity of monthly tops and witnessed some follow-through selling on the first day of a new trading week. The US dollar jumped back closer to last week's swing highs amid expectations for an imminent Fed taper announcement. This, in turn, was seen as a key factor that exerted heavy downward pressure on the GBP/USD pair.
Despite the dismal US jobs report for August and a surge in new COVID-19 cases, investors seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus later this year. The market speculations were reinforced by Philadelphia Fed President Patrick Harker's comments on Monday, who joined a chorus of policymakers keen to trim $120 billion in monthly bond purchases.
This, along with the recent spike in the US Treasury bond yields, continued acting as a tailwind for the greenback. In fact, the yield on the benchmark 10-year US government bond shot closer to the 1.35% threshold on Friday following the release of the US Producer Price Index (PPI). The PPI recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time.
Hence, the market focus now shifts to the latest US consumer inflation figures, due for release on Tuesday. Apart from this, the US monthly Retail Sales figures later in the week might influence the USD price dynamics ahead of the FOMC meeting on September 21-21. Nevertheless, the fundamental backdrop favours USD bulls and supports prospects for additional losses for the GBP/USD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds gains near 1.0650 amid risk reset
EUR/USD is holding onto its recovery mode near 1.0650 in European trading on Friday. A recovery in risk sentiment is helping the pair, as the safe-haven US Dollar pares gains. Earlier today, reports of an Israeli strike inside Iran spooked markets.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD is rebounding toward 1.2450 in early Europe on Friday, having tested 1.2400 after the UK Retail Sales volumes stagnated again in March, The pair recovers in tandem with risk sentiment, as traders take account of the likely Israel's missile strikes on Iran.
Gold price defends gains below $2,400 as geopolitical risks linger
Gold price is trading below $2,400 in European trading on Friday, holding its retreat from a fresh five-day high of $2,418. Despite the pullback, Gold price remains on track to book the fifth weekly gain in a row, supported by lingering Middle East geopolitical risks.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.