GBP/USD bulls pressured as US dollar bounces back to life

At 1.2577, GBP/USD is under a little pressure in Tokyo after sliding from a high of 1.2597 and reaching a low of 1.2566. In the prior session, sterling dropped to its lowest level in nearly three weeks at 1.2433 before trimming losses in a surge of demand when London flipped over despite the political headwinds for British Prime Minister Johnson. The greenback was sold off which save the day for cable longs. 

Boris Johnson survived a confidence vote of 211 to 148, but his 59% share of the vote was less than the 63% achieved by his predecessor Theresa May in her confidence vote of December 2018 who was replaced seven months later, as Reuters remarked. The victory was bitter given he now faces a leadership challenge. With so many of his party had voted against him, the prime minister has effectively lost his majority support in parliament, with the risk that his government is paralysed.

Meanwhile, as measured by the 10-year Treasury yield, yields were falling overnight for the second day of trade this week, down from the 3.062% highs to print lows of 2.963%. Consequently, the greenback was dropping to the lows of the day near 102.30as measured by the US dollar index (DXY), vs. a basket of six currencies. In Asia, DXY is regaining some ground, up 0.18% and reaching a high of 102.558.

Meanwhile, besides the European Central Bank this week, traders will be looking to the US inflation data due Friday for clues on the Federal Reserve's interest rate hike trajectory. We are in a blackout period in terms of Fed speakers. The event will be an important one ahead of the Federal Open Market Committee meeting on June 14-15 where another 50 basis points of rate hikes are currently being priced in.