- GBP/USD caught fresh bids on Tuesday and built on the overnight rebound from sub-1.3800 levels.
- The USD retreated further from two-week tops and was seen as a key factor that provided a boost.
- Hawkish Fed expectations should help limit the USD losses and cap any further gains for the major.
The GBP/USD pair rallied over 50 pips from the early European session lows and shot to fresh daily tops, around 1.3880 region in the last hour.
After a rather muted reaction to the UK jobs report, the GBP/USD pair caught some fresh bids on Tuesday and built on the previous day's goodish rebound from sub-1.3800 levels. The UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell 58.6K in August as against 71.7K decline anticipated. The slight disappointment, to a larger extent, was offset by the expected decline in the unemployment rate – to 4.6% during the three months to July – and did little to provide any impetus.
On the other hand, the US dollar retreated further from the two-week tops touched on Monday. This, in turn, was seen as a key factor that assisted the GBP/USD pair to regain positive traction and climb back closer to the 1.3890 supply zone. However, expectations for an imminent Fed taper announcement, along with a modest uptick in the US Treasury bond yields, should help limit any deeper losses for the greenback. This, in turn, makes it prudent to wait for some follow-through buying around the major before positioning for any further gains.
Investors might also refrain from placing aggressive bets, rather wait for a fresh catalyst from Tuesday's release of the latest US consumer inflation figures. The US CPI report will be looked upon for clues about the likely timing of the Fed's tapering plan. This, in turn, will play a key role in influencing the near-term USD price dynamics and provide some meaningful impetus to the GBP/USD pair ahead of the FOMC policy meeting on September 20-21.
Technical levels to watch
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