GBP/USD flirts with session lows, around mid-1.4100s
- GBP/USD met with some fresh supply on Tuesday and erased the previous day’s modest gains.
- COVID-19 jitters, Brexit woes acted as a headwind for the major amid a modest USD strength.
- Sliding US bond yields might cap the upside for the greenback and help limit losses for the pair.
The GBP/USD pair remained depressed heading into the European session and was last seen hovering near the lower boundary of its daily trading range, around mid-1.4100s.
A combination of factors failed to assist the GBP/USD pair to capitalize on its gains recorded over the past two trading session, instead prompted some fresh selling on Tuesday. The pair once again started retreating from the vicinity of the 1.4200 mark and has now reversed the previous day's positive move.
The British pound was pressured by doubts over the UK government's plan to reopen the economy on June 21 in light of the spread of the so-called Delta variant. Apart from this, indications that Britain's relationship with the European Union has been souring exerted some additional downward pressure on the GBP/USD pair.
In a further escalation of a dispute over the Northern Ireland protocol, the EU is reportedly considering tougher retaliatory measures if the U.K. government fails to implement its post-Brexit obligations. This, along with a modest pickup in the US dollar demand, further contributed to the GBP/USD pair's slide.
Friday's softer NFP print tempered market expectations that the Fed could begin tapering its asset-purchases sooner rather than later. That said, investors remain worried over rising inflationary pressure. This, in turn, held investors from placing any aggressive bearish bets around the USD, rather prompted some short-covering.
Apart from this, a softer tone around the equity markets was seen as another factor lending some support to the safe-haven greenback. However, the ongoing decline in the US Treasury bond yields might keep a lid on any meaningful gains for the USD and help limit any deeper losses for the GBP/USD pair, at least for the time being.
There isn't any major market-moving macro data due for release from the UK on Tuesday, while the US economic docket features second-tier releases of Trade Balance figures and JOLTS Job Openings. The data is unlikely to provide any meaningful impetus, leaving the USD at the mercy of the US bond yields and the broader market risk sentiment.
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.
