GBP/USD flirts with session lows, around mid-1.3800s

The GBP/USD pair extended its steady intraday descent through the first half of the European session and dropped to fresh daily lows, around mid-1.3800s in the last hour.

The pair continued with its struggle to find acceptance above the 1.3900 mark for the second straight session, instead met with some fresh supply on Tuesday and was pressured by a combination of factors. The disappointing data released by the British Retail Consortium (BRC), along with COVID-19 and Brexit woes continue acting as a headwind for the British pound.

In fact, the BRC Like-For-Like Retail Sales recorded a 6.7% YoY growth in June as against consensus estimates for a 24% increase and 18.5% rise reported in the previous month. Apart from this, a dispute over the size of the UK's Brexit bill and worries about new coronavirus variant largely overshadowed the optimism led by the unlocking of the UK economy.

The UK Prime Minister Boris Johnson confirmed on Monday that COVID-19 restrictions in England will end on July 19, though stressed the need for the public to remain vigilant. Johnson further stated that the pandemic still poses a threat amid the looming fears of another major outbreak led by the highly contagious Delta variant of the coronavirus.

On the other hand, the US dollar remained well supported by expectations that the Fed is moving towards tightening its monetary policy sooner. Apart from this, a modest uptick in the US Treasury bond yields further underpinned the greenback. This, in turn, was seen as another factor that exerted some downward pressure on the GBP/USD pair.

The market focus will remain glued to Tuesday's release of the latest US consumer inflation figures. Given that Fed officials have agreed on the need to be ready to act if inflation or other risks materialize, the data may offer clues about the likely timing of tapering and interest rate hikes. This might provide some meaningful impetus to the GBP/USD pair.

Technical levels to watch