GBP/USD flirts with session lows, around 1.3100 mark amid stronger USD

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  • GBP/USD retreats from five-month tops amid a goodish pickup in the USD demand.
  • Concerns about worsening US-China relations drove haven flows towards the buck.
  • The downside is likely to remain limited ahead of the US monthly jobs report (NFP).

The GBP/USD pair extended its steady intraday retracement slide through the early European session and refreshed daily lows, around the 1.3085 region in the last hour.

The pair witnessed some selling on the last day of the week and moved away from five-month tops, set on Thursday in reaction to the BoE’s less pessimistic tone on the outlook for the British economy. The pullback was exclusively sponsored by a goodish pickup in the US dollar demand.

The global risk sentiment took a hit after the US President Donald Trump signed executive orders that would ban any US transactions with the Chinese companies that own TikTok and WeChat. This, in turn, drove some haven flows towards the US dollar and exerted pressure on the GBP/USD pair.

The anti-risk flows led to a fresh leg down in the US Treasury bond yields. This coupled with worries over the pace of the economic recovery and the deadlock in the US Congress over the next round of the US fiscal stimulus might hold investors from placing any aggressive USD bullish bets.

After concluding talks on Thursday, the US Treasury Secretary Steven Mnuchin warned that Republicans and Democrats are still very far apart on key issues. Mnuchin further added that Trump is prepared to issue an executive order if the two sides fail to meet the end-of-the-week deadline.

Apart from this, investors might also be reluctant to place any aggressive bets ahead of Friday’s release of the closely-watched US monthly jobs report (NFP). This might further collaborate towards limiting any meaningful slide for the GBP/USD pair, at least for the time being.

The US economy is expected to have added 1.6 million jobs in July as compared to 4.8 million in the previous month. Meanwhile, the unemployment rate is expected to edge lower to 10.5% from 11.1%. A weaker reading will further indicate that the US labour market recovery was faltering and prompt some fresh USD selling, which should assist the GBP/USD pair to resume its recent bullish trend.

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