- A combination of factors continued lending some support to GBP/USD on Thursday.
- Optimism over a stronger economic recovery in the UK underpinned the British pound.
- Powell’s dovish comments, the upbeat market mood weighed on the safe-haven USD.
The GBP/USD pair refreshed daily lows during the early European session, albeit quickly recovered few pips thereafter. The pair was last seen trading near mid-1.4100s, up around 0.10% for the day.
Following an early uptick to the 1.4170 region, the pair witnessed some selling and quickly retreated around 50 pips in the last hour. However, a combination of factors helped limit any further decline, instead assisted the GBP/USD pair to attract some dip-buying near the 1.4120 region.
The British pound remained well supported by the impressive speed of the coronavirus immunization campaign and the UK government’s plan to ease the current lockdown measures. In fact, UK Prime Minister Boris Johnson has already unveiled a new four-step plan to end restrictions by 21 June.
The development seemed to have lifted hopes for a swift UK economic recovery and dampened prospects for any further rate cut by the Bank of England. This, along with the prevalent US dollar selling bias, continued lending some support to the GBP/USD pair and might help limit any meaningful slide.
The USD was pressured by Fed Chair Jerome Powell’s dovish comments, reassuring that interest rates would stay low for a long time. Apart from this, the underlying bullish tone in the financial markets further undermined the USD’s relative safe-haven status against its British counterpart.
Investors remain optimistic about a strong global economic recovery amid the progress in COVID-19 vaccinations and US President Joe Biden’s $1.9 trillion stimulus package. The reflation trade continued pushing the US bond yields higher, albeit did little to provide any respite to the USD.
That said, overbought conditions on the daily chart might hold bullish traders from placing aggressive bets. This, in turn, might keep a lid on any meaningful upside for the GBP/USD pair, at least for the time being, amid absent relevant market moving economic releases from the UK.
Later during the early North American session, a duo of important US macro data might influence the USD price dynamics and produce some short-term trading opportunities. The US economic docket highlights the release of the second estimate (Prelim) of Q4 GDP and Durable Goods Orders.
Technical levels to watch
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