GBP/USD pares intraday losses, down little around mid-1.3700s

The GBP/USD pair remained on the defensive through the early North American session, albeit has managed to rebound around 30 pips from daily lows and was last seen trading around mid-1.3700s.

The pair attracted some dip-buying near the 1.3920 region and is now looking to build on this week's strong rebound from sub-1.3600 levels, or the lowest level since February. As investors looked past mixed US macro releases, a subdued US dollar price action was seen as a key factor that extended some support to the GBP/USD pair.

Data released earlier this Friday showed that the headline UK Retail Sales recorded a growth of 0.5% in June as compared to 0.4% expected. This, however, was offset by a slight disappointment from sales tripping the auto motor fuel, which increased a modest 0.3% during the reported month as against consensus estimates for a 0.6% rise.

Separately, the closely watched report from IHS Markit showed that business activity in the UK manufacturing and services sector slowed significantly in July. The data fueled concerns about the pace of the economic recovery from the pandemic amid the resurgence of cases in the UK and acted as a headwind for the British pound.

Meanwhile, investors now seemed to have set aside worries about the fast-spreading Delta variant of the coronavirus. This was evident from a generally positive tone around the equity markets. The risk-on impulse undermined the safe-haven greenback and assisted the GBP/USD pair to find decent support near the 1.3720 area.

That said, a strong intraday pickup in the US Treasury bond yields helped limit any deeper losses for the USD and capped gains for the GBP/USD pair. The USD moved little following the release of better-than-expected US flash Manufacturing PMI, which was largely negated by an unexpectedly sharp fall in the gauge for the services sector.

It will now be interesting to see if the GBP/USD pair is able to capitalize on the attempted recovery move or continues with its struggle to move back above the 1.3800 mark. Nevertheless, the pair remains on track to end nearly unchanged for the week.

Technical levels to watch