- GBP/USD rallied over 85 pips in reaction to hawkish comments by BoE’s Saunders.
- COVID-19 jitters benefitted the safe-haven USD and capped the upside for the pair.
- Investors now eye US economic data, Powell’s testimony for a fresh trading impetus.
The GBP/USD pair shot to the 1.3900 neighbourhood, or fresh daily tops in the last hour, albeit quickly retreated few pips thereafter. The pair was last seen trading just above mid-1.3800s, nearly unchanged for the day.
Following an early dip to the 1.3815-10 region, the GBP/USD pair witnessed a dramatic turnaround on Thursday and rallied back closer to the top end of its weekly trading range. The strong intraday rally of around 85 pips was sponsored by hawkish comments by the BoE policymaker, Michael Saunders. During a scheduled speech at an online event, Saunders said that the question of whether to curtail our current asset purchase program earlier will be under consideration at our forthcoming meetings.
This comes on the back of Wednesday's hotter-than-expected UK CPI report and mostly upbeat UK monthly employment details released earlier this Thursday. The developments fueled speculations that the BoE will consider scaling back its huge stimulus program sooner, which, in turn, prompted some aggressive short-covering move around the GBP/USD pair. That said, the emergence of some US dollar buying held bulls from positioning for any further gains and capped any meaningful upside for the major.
As investors digested the Fed Chair Jerome Powell's dovish testimony on Wednesday, a generally weaker risk tone turned out to be a key factor that benefitted the safe-haven USD. Worries about the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment and took its toll on the global risk sentiment. This was evident from a sharp fall in the US equity futures, which helped offset an extension of the sharp decline in the US Treasury bond yields.
Market participants now look forward to the US economic docket, featuring the releases of the usual Initial Weekly Jobless Claims and Philly Fed Manufacturing Index. This, along with the US bond yields and Powell's second day of testimony, will influence the USD and provide some impetus to the GBP/USD pair. Powell is unlikely to deviate from his views that the current inflationary pressures was only temporary, which should act as a headwind for the greenback and lend some support to the major.
Technical levels to watch
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