GBP/USD bounces off multi-day lows, steadies around 1.3700 mark
- A modest USD pullback assisted GBP/USD to attract some dip-buying near the 1.3680 area.
- Rising bets for an early tapering move by the Fed should help limit the downside for the USD.
- The focus remains glued to Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.
The GBP/USD pair managed to rebound around 20-25 pips from Asian session lows and was last seen trading in the neutral territory, around the 1.3700 round-figure mark.
The pair extended the previous day's retracement slide from the 1.3760 area, or one-week tops and edged lower during the early part of the trading action on Friday. However, a modest US dollar downtick extended some support, rather assisted the GBP/USD pair to attract some buying near the 1.3680 region.
As investors digest the overnight hawkish comments by Fed officials, the underlying bullish sentiment – as depicted by a generally positive tone around the equity markets – undermined the safe-haven USD. Apart from this, a softer tone around the US Treasury bond yields further acted as a headwind for the greenback.
That said, speculations that the Fed might still begin rolling back its pandemic-era stimulus should hold traders from placing aggressive bearish bets around the USD. The market expectations were reinforced by St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan's remarks on Thursday.
Speaking to CNBC, Bullard said that he was sceptical that inflation would moderate and would want asset tapering to be completed by the first quarter of 2022. Adding to this, Kaplan said the strength of the US economy still puts the Fed on track to begin reducing its monthly bond purchases in October or soon after.
Hence, the market focus will remain on Fed Chair Jerome Powell's speech at the Jackson Hole Symposium, due later during the early North American session. Investors will look for clues about the likely timing of the Fed's policy tightening, which will drive the USD and provide a fresh impetus to the GBP/USD pair.
In the meantime, traders might prefer to wait on the sidelines, which, in turn, should keep a lid on any meaningful upside for the GBP/USD pair. Friday's release of the Fed's preferred inflation gauge – Core PCE Price Index – might also do little to influence or produce any trading opportunities around the GBP/USD pair.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
