- GBP/USD rallies over 60 pips from session lows and moves back closer to daily tops.
- The prevalent USD selling bias turned out to be a key factor driving the pair higher.
- The GBP got an additional boost after UK PM announced lockdown easing measures.
The GBP/USD pair reversed a mid-European session dip to the 1.2430 region and might now be headed back towards the top end of its daily trading range.
Having struggled to find acceptance above the 1.2500 psychological mark, the pair witnessed a modest intraday pullback despite upbeat UK macro data. The flash version of the UK Manufacturing PMI jumped back into the expansion territory and came in at 50.1 in June. Adding to this, Adding to this, the gauge for the UK services activity also surpassed consensus estimates and climbed to 47 for June from 29 previous.
The downtick lacked any obvious fundamental catalyst and was quickly bought into amid some follow-through selling around the US dollar. Following an early uptick led by White House trade advisor Peter Navarro’s comments on the US-China trade deal, the greenback turned back lower and extended the previous day’s retracement slide from three-week tops.
It is worth recalling that Navarro told Fox News that the trade agreement with China is “over”, albeit quickly backtracked and clarified that his comments had been taken wildly out of context. The US President Donald Trump provided further assurance and tweeted that the phase-one trade deal with China was still intact.
The USD selling pressure remained unabated after St. Louis Fed President James Bullard said that the Fed has deployed a lot of tools in response to the coronavirus pandemic. Speaking on Bloomberg TV, Bullard further added that the Fed is providing great forward guidance a moment and keeping an eye on asset bubble risks.
On the other hand, the British pound got a minor lift in reaction to the UK Prime Minister Boris Johnson’s move to announce relaxing of lockdown measures in England. The new rules will be applicable from 4 July and will allow tourism, hospitality, cinemas, galleries, libraries in England to reopen for business.
It will now be interesting to see if the pair is able to capitalize on the momentum or continues with its struggle to build on the momentum beyond the 1.2500 mark. Market participants now look forward to the US economic docket – highlighting the release of flash Manufacturing/Services PMI. This will be followed by New Home Sales data and the Richmond Manufacturing Index, which might provide some short-term trading impetus.
Technical levels to watch
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