GBP/USD jumps to 1.3530-35 area, fresh session top amid weaker USD
- GBP/USD attracted some buying near the mid-1.3400s amidst renewed USD selling.
- The prevalent risk-on environment acted as a headwind for the safe-haven USD.
- Rebounding US bond yields might limit the USD slide and cap gains for the major.
- Dovish BoE and Brexit jitters might further hold bulls back from placing aggressive bets.
The GBP/USD pair climbed further beyond the key 1.3500 psychological mark and refreshed daily tops heading into the North American session. The pair was last seen trading around the 1.3530-35 region, up nearly 0.30% for the day.
Following an intraday dip to mid-1.3400s, the GBP/USD pair gained some positive traction and built on Friday's recovery move from five-week lows touched in reaction to the upbeat US NFP report. The underlying bullish sentiment in financial markets undermined the safe-haven US dollar, which, in turn, was seen as a key factor that provided a goodish lift to the major.
The passage of a long-delayed $1 trillion US infrastructure bill added to optimism over global economic growth and turned out to be a key factor that boosted investors' confidence. That said, a solid rebound in US Treasury bond yields should limit USD losses. This, along with Brexit jitters, could keep a lid on any further gains for the GBP/USD pair.
The Fed last week stuck to its transitory inflation narrative and indicated that policymakers were in no rush to hike borrowing costs. Market participants, however, seem convinced that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. This was seen as a key factor that pushed US bond yields higher.
Investors remain worried, meanwhile, that the UK government will trigger Article 16 of the Northern Ireland Protocol. Apart from this, the Bank of England's surprise decision last week to keep interest rates steady might further hold bulls back from placing aggressive bets on the British pound. This warrants some caution before positioning for any further appreciating move for the GBP/USD pair.
In the absence of any major market-moving economic releases on Monday, traders will take cues from Fed Chair Jerome Powell's remarks at an online conference. This, along with US bond yields and broader market risk sentiment, will drive USD demand. Apart from this, BoE Governor Andrew Bailey's comments will influence GBP and provide some impetus to the GBP/USD pair.
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.
