On Thursday, a confluence of events pulled the GBP/USD back below the 1.3800 level.
COVID-
The sterling was hampered by 19 worries and Bailey’s dovish comments.
The USD was supported by hawkish Fed predictions and rising US bond rates, which added to the selling tendency.
In the last hour, the GBP/USD pair has fallen below the 1.3800 mark, hovering only a few pips above two-month lows hit last week.
Instead of capitalizing on its early European session rise to the 1.3835 level, the pair was hit with fresh supply in response to comments from Bank of England Governor Andrew Bailey. Bailey, speaking at the Mansion House in London, avoided any hawkish overtones and emphasized that the jump in inflation is considered to be a one-time occurrence.
This comes amid concerns over the development of the more contagious Delta version of the coronavirus, which weighed on the British pound with a lower revision to the UK Manufacturing PMI. In June, the gauge was finalized at 63.9, compared to a flash estimate of 64.2. Aside from that, the GBP/USD pair was put under some extra downward pressure by the US dollar’s minor rise.
Speculations that the Fed will tighten its monetary policy if price pressures continue to worsen bolstered the dollar. Market expectations were bolstered by hawkish remarks from Dallas Fed President Robert Kaplan on Wednesday, who said the Fed is seeing a broadening of price pressures and would prefer to taper sooner rather than later this year.
A significant comeback in US Treasury bond yields added to the greenback’s already strong position. The underlying bullish tone in the financial markets, however, discouraged investors from making big bullish wagers on the safe-haven currency. Nonetheless, the GBP/USD pair is set to extend its corrective decline from mid-1.4200s or three-year highs.
Market players are now anticipating the publication of the ISM Manufacturing PMI and Weekly Jobless Claims in the United States. This, together with US bond yields and broader market risk sentiment, might impact USD price dynamics and provide the GBP/USD pair a boost. However, the spotlight will remain on Friday’s US jobs report (NFP)./n
