- A combination of factors assisted GBP/USD to attract some dip-buying on Thursday.
- Retreating US bond yields underpinned the USD demand and extended some support.
- An upward revision of the UK Manufacturing PMI provided an additional lift to the pair.
- The lack of any strong follow-through buying warrants some caution for bullish traders.
The GBP/USD pair refreshed daily tops during the early European session, albeit quickly retreated few pips thereafter. The pair was last seen trading around the 1.3780-85 region, nearly unchanged for the day.
The pair attracted some dip-buying for the second straight session on Thursday and was supported by a combination of factors. The yield on the benchmark 10-year US government bond retreated further from 14-month tops and slipped to the 1.70% threshold. This, in turn, kept the US dollar bulls on the defensive and extended some support to the GBP/USD pair.
The British pound got an additional boost after the UK Manufacturing PMI was revised higher to 58.9 for March as against 57.9 estimated earlier. Against the backdrop of Britain’s swift roll-out of COVID-19 vaccines and the gradual reopening from pandemic-related restrictions, the data supported prospects for a swift recovery for the UK economy.
That said, expectations for a relatively faster US economic recovery from the pandemic helped limit any meaningful downside for the greenback and capped any further gains for the GBP/USD pair. Investors remain optimistic about the outlook for the US economy amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan.
Meanwhile, the intraday positive move faltered just ahead of the 1.3800 round-figure mark, which should now act as a key pivotal point for short-term traders. Hence, it prudent to wait for some follow-through buying, possibly beyond the overnight swing highs near the 1.3810 region, before positioning for any meaningful move up for the GBP/USD pair.
Market participants now look forward to the US economic docket, featuring the ISM Manufacturing PMI. This, along with the US bond yields, will influence the USD price dynamics and allow traders to grab some short-term opportunities around the GBP/USD pair. The key focus, however, will remain on Friday’s release of the closely-watched US monthly jobs report (NFP).
Technical levels to watch