GBP/USD consolidates in a range above 1.4100 mark, Bailey’s speech awaited

The GBP/USD pair extended its consolidative price move through the first half of the European session and remained confined in a range just above the 1.4100 mark.

A modest US dollar strength failed to assist the pair to build on the previous day's strong positive move to the highest level since February 25, led by the outcome of the Scottish election. It is worth mentioning that Nicola Sturgeon’s Scottish National Party (SNP) recorded its fourth consecutive victory but fell short of securing an outright majority. The result pushed back the risk of an imminent Scottish referendum on independence from the UK, which, in turn, prompted some aggressive short-covering around the British pound.

Meanwhile, an uptick in the US Treasury bond yields allowed the USD to built on the overnight bounce from more than two-month lows. As investors looked past Friday's disappointing US monthly jobs report, speculations that rising inflation might force the Fed to tighten its monetary policy sooner rather than later pushed the US bond yields higher. Apart from this, a sharp fall in the global equity markets forced investors to take refuge in the safe-haven greenback. This was seen as a key factor that capped the upside for the GBP/USD pair.

The downside, however, is likely to remain cushioned amid growing optimism about the UK economic recovery from the pandemic amid a sharp drop in COVID-19 deaths and new cases. In fact, the UK Prime Minister Boris Johnson on Monday confirmed the next stage of lockdown easing in England. The upbeat outlook was reaffirmed by NIESR on Monday, which raised its growth forecast for 2021 to 5.7% from 3.4% in February. The economic think tank predicts the UK economy to return to pre-pandemic levels by the end of 2022. This might act as a tailwind for the sterling.

From a technical perspective, Tuesday's price action might still be categorized as a consolidation phase following the strong gains of over 250 pips recorded in the past two trading sessions. Hence, any meaningful slide might still be seen as a buying opportunity, suggesting that the path of least resistance for the GBP/USD pair remains up. That said, bulls might wait for a scheduled speech by the Bank of England Governor Andrew Bailey before positioning for any further appreciating move amid absent relevant market moving economic releases from the UK or the US.

Technical levels to watch