- GBP/USD seesawed between tepid gains/minor losses through the early European session.
- COVID-19 jitters, dovish BoE acted as a headwind for the sterling and exerted some pressure.
- Sustained USD buying added to the selling bias, though the downside remains limited, for now.
- Investors seemed reluctant to place aggressive bets ahead of the US monthly jobs report (NFP).
The GBP/USD pair reversed an early European session dip to fresh two-and-half-month lows and was last seen trading in the neutral territory, around the 1.3760-65 region.
The pair witnessed some selling during the early part of the trading action on Friday and dropped to the lowest level since mid-April amid sustained US dollar buying interest. In fact, the key USD index shot to fresh three-month tops and remained well supported by speculations that the Fed will tighten its monetary policy sooner than anticipated.
The market expectations were further fueled by Wednesday's US ISM Manufacturing survey, which showed that the prices paid sub-component jumped to a record 92.1 in June. This, to a larger extent, helped offset a fresh leg down in the US Treasury bond yields and continued underpinning the greenback and exerted some pressure on the GBP/USD pair.
On the other hand, the British pound was weighed down by the overnight dovish comments by the BoE Governor, Andrew Bailey, saying that the central bank should not overreact to temporarily strong inflation. This, along with worries about the spread of the more contagious Delta variant of the coronavirus, acted as a headwind for the sterling.
Despite the negative factors, the GBP/USD pair managed to find some support near the 1.3745 area and quickly recovered around 20 pips in the last hour. The uptick, however, lacked any obvious catalyst and could be solely attributed to some repositioning trade ahead of the US monthly jobs data, due for release later during the early North American session.
The closely watched NFP report could influence the Fed's monetary policy outlook and play a key role in driving the greenback in the near term. This, in turn, should assist investors to determine the next leg of a directional move for the GBP/USD pair.
Technical levels to watch
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