- Resurgent USD demand prompted some fresh selling around GBP/USD on Tuesday.
- Mixed UK employment details did little to impress the GBP bulls or lift the major.
- Investors look forward to comments by US policymakers for some trading impetus.
The GBP/USD pair remained depressed below mid-1.3800s and moved little following the release of the UK monthly employment details.
The pair failed to capitalize on the previous day’s goodish bounce of around 60 pips, instead met with some fresh supply on Tuesday amid the emergence of some fresh buying around the US dollar. Investors remain optimistic about the prospects for a relatively stronger US economic recovery from the pandemic, which, in turn, continued underpinning the greenback.
The USD bulls further took cues from a slight deterioration in the risk sentiment and shrugged off a softer tone surrounding the US Treasury bond yields. Investors turned cautious after the US, Canada, UK and EU – in a rare coordinated move – imposed sanctions on Chinese officials over human rights violations in Xinjiang and further benefitted the safe-haven USD.
On the other hand, the British pound was weighed down by reports on Monday that the European Union is set to block exports of Oxford-AstraZeneca vaccines to the UK. A significant shortage in vaccine supplies could derail the UK government’s plan to exit the current lockdown, which was seen as another factor that kept the GBP bulls on the defensive.
The sterling got a minor lift after the latest UK jobs report showed that the unemployment rate dropped to 5% in February. This was better than consensus estimates pointing to a modest uptick to 5.2% from 5.1%, though was offset by a sharp rise in the number of people claiming unemployment-related benefits to 86.6K as against the 20.8K decline in the previous month.
The focus now shifts to Fed Chair Jerome Powell and Treasury Secretary Janet Yellen’s joint testimony on the quarterly CARES Act report before the House Financial Services Committee. In the prepared remarks released on Monday, both Powell and Yellen reaffirmed the upbeat US economic outlook, supporting prospects for additional gains for the buck.
This, in turn, suggests that the path of least resistance for the GBP/USD remains to the downside. Sustained weakness below the 1.3800 mark will confirm the bearish bias and set the stage for an extension of the recent rejection slide from the key 1.4000 psychological mark.
Technical levels to watch
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