Throughout the early European session, the GBP/USD exchange rate oscillated between tepid gains and slight losses.
COVID-19 concerns and a dovish BoE worked as a headwind for the pound and put pressure on it.
The selling bias was bolstered by sustained USD buying, while the downside appears restricted for the time being.
Investors appeared to be hesitant to make big wagers ahead of the US monthly jobs report (NFP).
The GBP/USD pair recovered from an early European session slump to new two-and-a-half-month lows and was last seen trading in neutral zone, at 1.3760-65.
During the early portion of Friday’s trading, the pair saw some selling and fell to its lowest level since mid-April, despite continued US dollar buying demand. In fact, the key USD index soared to new three-month highs, buoyed by expectations that the Federal Reserve may tighten its monetary policy sooner than expected.
The market’s hopes were boosted even more by the US ISM Manufacturing survey released on Wednesday, which revealed that the prices paid sub-component surged to a new high of 92.1 in June. This, to a greater extent, negated a fresh move lower in US Treasury bond rates, continued to boost the greenback, and put pressure on the GBP/USD pair.
The British pound, on the other hand, was dragged down by overnight dovish comments from Bank of England Governor Andrew Bailey, who stated that the central bank should not overreact to temporarily high inflation. The sterling faced a headwind as a result of this, as well as concerns over the spread of the more contagious Delta version of the coronavirus.
Despite the unfavorable causes, the GBP/USD pair found support near 1.3745 and recovered around 20 pips in the last hour. The increase, on the other hand, had any evident reason and could only be attributed to some repositioning trading ahead of the release of US monthly jobs data later in the early North American session.
The carefully watched NFP report might have an impact on the Federal Reserve’s monetary policy stance and help to drive the greenback in the short term. As a result, investors should be able to predict the next leg of the GBP/USD pair’s directional move./n
