- GBP/USD gained strong positive traction on Tuesday and recovered further from two-week lows.
- BoE Governor Bailey downplayed negative rate speculations and provided a strong lift to the GBP.
- The ongoing strong rally in the US bond yields continued underpinning the USD and capped gains.
The GBP/USD pair maintained its strong bid tone through the early North American session, with bulls still awaiting some follow-through buying beyond the 1.3600 mark.
The pair built on the previous day’s rebound from two-week lows, around mid-1.3400s and gained strong positive traction on Tuesday, snapping four consecutive days of losing streak. The buying interest picked up pace after the Bank of England (BoE) Governor, Andrew Bailey downplayed speculations on negative interest rates.
Bailey said that there are a lot of issues with negative interest rates and that it was soon to reach any conclusion about the need for future stimulus. Bailey’s comments also indicated that the BoE is likely to wait and see how the economy reacts to Brexit and the third lockdown in the UK before deciding on anything.
The not so dovish comments provided a strong intraday lift to the British pound. This, along with a subdued US dollar demand, prompted some short-covering around the GBP/USD pair. That said, the ongoing strong rally in the US Treasury bond yields continued underpinning the greenback and kept a lid on any further gains.
There isn’t any major market-moving economic data due for release on Tuesday, either from the UK or the US. Hence, the US bond yields will continue to play a dominant role in influencing the USD price dynamics. This, along with developments surrounding the coronavirus saga, will be looked upon for some short-term trading impetus.
Technical levels to watch
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