GBP/USD surrenders a major part of its intraday gains, back below 1.3900 mark

The GBP/USD pair retreated over 50 pips from daily swing highs and was last seen trading with modest gains, just below the 1.3900 mark.

The pair struggled to capitalize on its intraday positive move, instead met with some fresh supply near the 1.3940 region amid a modest pickup in the US dollar demand. Despite mixed signals on the US inflation, investors remain concerned that the Fed will tighten its monetary policy if price pressures continue to intensify. This helped offset a fresh leg down in the US Treasury bond yields and extended some support to the greenback.

It is worth recalling that Fed Chair Jerome Powell – during his testimony before the House Select Subcommittee last week – said that inflation is rising due to pent-up demand and supply bottlenecks. Powell stuck to the transitory inflation narrative and said that the price pressures should ease on their own. However, Friday's Core PCE Price Index recorded the largest gain since April 1992 and shot to 3.4% YoY in May.

On the other hand, the Bank of England's dovish stance last week continued acting as a headwind for the British pound and further collaborated towards capping gains for the GBP/USD pair. That said, the optimism that the UK remains on track to end COVID-19 restrictions on July 19 might help limit the downside for the major. The new UK Health Secretary Sajid Javid will update MPs later this Monday on when the COVID-19 measures will be lifted in England.

In the absence of any major market-moving economic releases, either from the UK or the US, the USD price dynamics will play a key role in influencing the GBP/USD pair. Apart from this, developments surrounding the coronavirus saga will also be looked upon for some short-term trading opportunities.

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