GBP/USD erases gains and drops below 1.3100
- Pound among the worst G10 performers during the American session.
- DXY trims losses as optimism starts to fade.
- GBP/USD unable to sustain a recovery, 1.3050 exposed.
The GBP/USD gave up all gains and dropped back under 1.3100 after reaching earlier a daily high at 1.3159. The dollar gained strength as Wall Street trimmed gains, while the pound weakened.
Data offset by market sentiment
The rally in stocks at the beginning of the US sessions pushed the dollar to fresh lows across the board. During the last hours, the optimism faded and the greenback recovered momentum. Still, lower US yields could limit the dollar’s upside. The 10-year yield is under 2.40%, down 2.60% so far on the day.
US data came in above expectation on Tuesday. The Jobs Opening and Labor Turnover Survey (JOLTS) showed job positions at 11.26 million (consensus 11.0 million); The S&P/Case-Shiller Home Price Index rose 19.1% in January from a year ago, above the 18.4% of market consensus. On the negative front, Conference Board’s consumer confidence index declined to 107.2, the lowest level in thirteen months. The ADP employment report is due on Wednesday and the Non-farm Payroll report on Friday.
Analysts at ING point out that “strong and vibrant housing and jobs markets reinforce the message that the Fed has a lot of work to do to regain control of inflation pressures. Consumer confidence is softening, presumably on the back of higher prices, but at least for now, households are happy to keep spending. The case for a series of 50bp Fed rate hikes is growing.” Fed’s Harker mentioned on Tuesday the central bank “collectively underestimated” the impact of fiscal spending on inflation.
The pound continues to show weakness after Bank of England Governor Bailey on Monday offered a cautious tone, warning about economic uncertainty. Also, the currency is being affected by the rally of EUR/GBP that trades above 0.8465, at the highest level since early March.
Technical levels
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
