- GBP/USD built on the previous session’s post-NFP recovery move from multi-week lows.
- Diminishing odds for an earlier rate hike by the Fed acted as a headwind for the greenback.
- The optimism over the easing of COVID-19 restrictions in the UK contributed to the uptick.
The GBP/USD pair edged higher during the early European session and climbed to three-day tops, closer to mid-1.3800s in the last hour.
The pair gained positive traction for the second consecutive session on Monday and is now looking to build on the previous session's post-NFP bounce from the lowest level since April 15. The uptick was supported by a combination of factors – a subdued US dollar demand and the optimism over the UK government's plan for the final step of easing COVID-19 restrictions.
The latest US monthly jobs data revealed that the unemployment rate unexpectedly ticked higher to 5.9% in June and largely negated the headline print, which showed that the US economy added 850K jobs. This helped ease market fears about an earlier than anticipated interest rate hike by the Fed and kept the USD bulls on the defensive through the first half of the trading action.
On the other hand, the British pound was supported by expectations that the UK Prime Minister Boris Johnson is preparing to lift most restrictions in England on July 19. The UK government has said that Johnson will outline the roadmap out of lockdown later this Monday. This was seen as another factor that forced investors to lighten their bearish bets around the GBP/USD pair.
It, however, remains to be seen if the GBP/USD pair is able to capitalize on the move or meets with some fresh supply at higher levels amid absent relevant market moving economic releases. Moreover, relatively thin liquidity conditions on the back of a holiday in the US might further hold traders from placing any aggressive bets, warranting some caution for bullish traders.
Technical levels to watch
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