GBP/USD remains heavily offered below 1.3700 mark, one-month lows
- Strong follow-through USD buying prompted fresh selling around GBP/USD on Thursday.
- The risk-off mood and the Fed’s tapering plan continued acting as a tailwind for the USD.
- Diminishing odds for a BoE rate hike in the near future further undermined the sterling.
The GBP/USD pair dropped to near one-month lows, around the 1.3665 region in the last hour, albeit recovered few pips thereafter. The pair was last seen trading just below the 1.3700 mark, still down over 0.40% for the day.
Following the previous day's modest bounce, the GBP/USD pair came under some fresh selling pressure on Thursday and prolonged its recent decline from the vicinity of the key 1.4000 psychological mark. A combination of factors pushed the US dollar to the highest level since November 2020, which, in turn, was seen as a key factor that dragged the GBP/USD pair lower.
Investors remain worried that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery. This was evident from a sea of red across the equity markets. Apart from this, expectations that the Fed will begin tapering its asset purchases later this year forced investors to take refuge in the traditional safe-haven USD.
On the other hand, the British pound was weighed down by concerns that job losses in the UK will rise after the furlough scheme ends in September. Apart from this, Wednesday's softer UK consumer inflation figures now seemed to have dashed hopes for a rate hike from the Bank of England in the near term. This was seen as another factor that undermined the sterling.
Given that the overnight attempted recovery faltered near the very important 200-day SMA, the ongoing downfall could further be attributed to some follow-through technical selling. A subsequent break and acceptance below the 1.3700 mark might have already set the stage for further losses for the GBP/USD pair, though oversold RSI on hourly charts warrants some caution.
Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. The data, along with the broader market risk sentiment, might influence the USD price dynamics later during the early North American session. This, in turn, might provide some trading 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.
