- GBP/USD seesawed between tepid gains/minor losses through the mid-European session.
- The upbeat UK economic outlook underpinned the sterling and helped limit the downside.
- A modest USD rebound from multi-month lows capped any meaningful gains for the pair.
The GBP/USD pair refreshed daily tops in the last hour, albeit quickly retreated few pips thereafter and was seen trading around mid-1.4100s heading into the North American session.
The pair continued with its two-way price moves for the third consecutive session on Wednesday and remained confined in a broader trading range held over the past one week or so. In the absence of any relevant economic data, investors preferred to move on the sidelines and wait for a fresh catalyst before placing fresh directional bets.
Meanwhile, the downside remains cushioned amid the optimistic outlook for the UK economy, bolstered by the impressive pace of coronavirus vaccinations and the gradual easing of lockdown restrictions. In fact, the UK’s health service on Wednesday extended its COVID-19 age-based vaccination programme to cover everyone aged 30 and over.
Commenting on the latest development, UK Health Secretary Matt Hancock said: “Our vaccination programme is moving at such a phenomenal pace and I am delighted that less than six months after Margaret Keenan received the first authorised jab in the world, we are now able to open the offer to everyone in their thirties and over.”
This bodes well with the UK government’s plan to end restrictions fully on June 21, which, in turn, continued acting as a tailwind for the British pound. The supporting factor, to some extent, was offset by a modest US dollar rebound from multi-month lows. This was seen as the only factor that capped gains for the GBP/USD pair, at least for now.
Meanwhile, the USD uptick could be solely attributed to some short-covering, which runs the risk of fizzling out rather quickly amid dovish Fed expectations. Various FOMC officials eased worries about runaway inflation and reiterated that any spike in prices would be temporary, forcing investors to scale down their bets for an earlier than anticipated lift-off.
The fundamental backdrop remains in favour of bullish traders and supports prospects for additional gains. The positive outlook is reinforced by the emergence of some dip-buying in the vicinity of the 1.4100 mark. That said, it will still be prudent to wait for a sustained move beyond the 1.4200 mark before positioning for any further appreciating move.
