- GBP/USD gained strong positive traction for the third consecutive session on Tuesday.
- Dovish Fed expectations, a positive risk tone weighed heavily on the safe-haven USD.
- Upbeat UK jobs report further boosted the GBP and remained supportive of the move.
The USD selling bias picked up pace during the early European session and pushed the GBP/USD pair beyond the 1.4200 mark, or the highest level since February 24.
A combination of supporting factors assisted the pair to gain strong follow-through traction for the third consecutive session on Tuesday. The US dollar maintained its bearish tone amid speculations that the Fed will keep interest rates low for a longer period. This, along with mostly upbeat UK employment details, provided an additional boost to the GBP/USD pair.
Friday's disappointing US Retail Sales report reaffirmed the Fed's dovish view and forced investors to scale back their expectations for an earlier than anticipated lift-off. Apart from this, a generally positive risk tone further undermined the safe-haven USD, which, so far, has failed to gain any respite from a modest uptick in the US Treasury bond yields.
On the other hand, the British pound remained well supported by the upbeat outlook for the UK economic recovery from the pandemic amid the gradual easing of lockdown restrictions. The optimism was further fueled by a better-than-expected UK jobs report, which showed that the official unemployment rate unexpectedly edged lower to 4.8% during the three months to March.
Adding to this, the claimant count change recorded a surprise drop of 15.1K in April and the previous month's reading was also revised to show a decline of 19.4K as against +10.1K reported previously. This was seen as another factor that acted as a tailwind for the sterling and remained supportive of the strong bid tone surrounding the GBP/USD pair.
Moving ahead, there isn't any major market-moving economic data due for release from the US. This, in turn, suggests that the path of least resistance for the GBP/USD pair is to the upside. That said, slightly overbought conditions on intraday charts might hold traders from placing aggressive bullish bets as the focus now shifts to the FOMC minutes on Wednesday.
Technical levels to watch
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