- Brexit/COVID-19 jitters dragged GBP/USD to one-month lows on Monday.
- A subdued USD demand extended some support and helped limit losses.
- Investors seemed reluctant to place fresh bets ahead of the FOMC meeting.
The GBP/USD pair managed to rebound around 30-35 pips from one-month lows and now seems to have stabilised near the 1.4100 round-figure mark.
The pair witnessed some selling during the first half of the trading action on Monday and dropped to the lowest level since mid-May, albeit managed to find some support near the 1.4070 region. The British pound was being weighed down by Brexit jitters and worries that the UK may delay its plans to end restrictions fully in light of the spread of the Delta variant.
In fact, Senior ministers in the UK signed off a decision to postpone the lifting of all COVID-19 restrictions beyond June 21. The UK Prime Minister Boris Johnson will make a statement on the coronavirus situation later this Monday and push back the timeline to end lockdown measures. This, in turn, was seen as a key factor that acted as a headwind for the sterling.
On the other hand, expectations that the Fed might begin the discussion on tapering its asset purchases in the face of rising inflationary pressures extended some support to the US dollar. That said, a softer tone surrounding the US Treasury bond yields held the USD bulls from placing aggressive bets and helped limit any deeper losses for the GBP/USD pair, at least for now.
Moreover, investors also seemed reluctant to place any aggressive bets ahead of the upcoming FOMC meeting on June 15-16. There isn't any major market-moving economic data due for release on Monday, either from the UK or the US. This further makes it prudent to wait for some strong follow-through selling before traders start positioning for any further depreciating move.
Technical levels to watch
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