GBP/USD flirts with multi-month lows, below 1.3800 mark
- A combination of factors dragged GBP/USD back below the 1.3800 mark on Thursday.
- COVID-19 jitters and Bailey’s dovish comments acted as a headwind for the sterling.
- Hawkish Fed expectations, rebounding US bond yields underpinned the USD and contributed to the selling bias.
The GBP/USD pair slipped below the 1.3800 mark in the last hour and was last seen hovering just a few pips above two-month lows touched last week.
The pair struggled to capitalize on its early European session uptick to the 1.3835 area, instead met with some fresh supply in reaction to the Bank of England (BoE) Governor, Andrew Bailey’s comments. Speaking at the Mansion House, in London, Bailey refrained from offering any hawkish cues and reiterated that the rise in inflation expected to be a temporary feature.
This comes amid worries about the spread of the more contagious Delta variant of the coronavirus, which along with a downward revision of the UK Manufacturing PMI weighed on the British pound. The gauge was finalized at 63.9 for June as against the 64.2 flash estimate. Apart from this, a modest US dollar strength exerted some additional downward pressure on the GBP/USD pair.
The USD remained supported by speculations that the Fed will tighten its monetary policy if price pressures continue to intensify. The market expectations were cemented by hawkish comments from Dallas Fed President Robert Kaplan on Wednesday, saying that they are seeing a broadening of price pressures and would prefer to taper sooner than the end of the year.
The already stronger greenback was further underpinned by a solid rebound in the US Treasury bond yields. That said, the underlying bullish tone in the financial markets held investors from placing any aggressive bullish bets around the safe-haven buck. Nevertheless, the GBP/USD pair remains on track to prolong its corrective slide from mid-1.4200s or three-year tops.
Market participants now look forward to the US economic docket, highlight the release of the ISM Manufacturing PMI and Weekly Jobless Claims. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair. The key focus, however, will remain on Friday's US jobs report (NFP).
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
