GBP/USD slides further below mid-1.3900s, fresh six-week lows
- GBP/USD turned lower for the fifth consecutive session on Thursday amid sustained USD buying.
- The Fed’s hawkish shift, a generally softer risk tone continued underpinning the safe-haven USD.
- Brexit/COVID-19 woes acted as a headwind for the sterling and contributed to the selling bias.
The post-FOMC strong USD buying interest dragged the GBP/USD pair to fresh six-week lows, around the 1.3935 region during the mid-European session on Thursday.
The pair struggled to capitalize on its early uptick, instead met with some fresh supply near the key 1.4000 psychological mark and turned lower for the fifth consecutive session on Thursday. The ongoing downward trajectory was exclusively sponsored by strong follow-through US dollar positive move to the highest level since April 13.
The Fed surprised markets with a hawkish turn on Wednesday and indicated that rate hikes could come as soon as 2023. The so-called dot plot pointed to two hikes by the end of 2023 as against March's projection for no increase until 2024. A hawkish shit continued acting as a tailwind for the USD and exerted some pressure on the GBP/USD pair.
The USD bulls seemed rather unaffected by a modest pullback in the US Treasury bond yields, instead took cues from a generally softer risk tone. This extended additional support to the safe-haven greenback.
On the other hand, the British pound was weighed down by concerns about the EU-UK collision over Northern Ireland protocol. In the latest Brexit-related developments, UK Prime Minister Boris Johnson said on Wednesday that they will have to take steps to make sure the post-Brexit trade between Britain and NI is uninterrupted.
This, along with the UK government's decision to push back the timeline for the final stage of easing lockdown measures to July 19, further contributed to the offered tone surrounding the GBP/USD pair. In the absence of any major market-moving economic releases, the USD price dynamics will continue to play a key role in driving the major.
Market participants now look forward to the US economic docket – featuring the release of the Philly Fed Manufacturing Index and the usual Initial Weekly Jobless Claims. This, along with the US bond yields and the broader market risk sentiment, will influence the USD and allow traders to grab some short-term opportunities around 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.
