- GBP/USD extends the previous gains, retests multi-month high near 1.4200.
- Lower US Treasury yields weigh on the demand for the US dollar.
- Upbeat economic outlook keeps the pound on the front foot.
The GBP/USD started the week on a positive note with modest gains on Monday. The pair moves in a narrow trading band of 20-pips.
At the time of writing, the GBP/USD pair trades at 1.4198, up 0.07% for the day.
GBP/USD remains largely unchanged and makes the usual move between 1.4170-1.4220 witnessed in the previous week. The pair edged higher on Thursday, retesting the weekly highs near 1.4230 in the wake of Bank of England (BOE) policymaker Gertjan Vileghe’s comments on the rate hike.
The central banks globally are now talking about the possibility of a sooner than expected rate hike, backed by the stronger economic recovery. However, Fed officials often seem comfortable with the recent rising pricing pressures, while other central banks are gearing up for tapering measures.
The US Dollar Index (DXY), which tracks the performance of the greenback against six majors, slipped below the 90 mark with 0.04% losses for the day. The US Treasury yields remained depressed near 1.58%, retreating from 1.62%.
On the other hand, the sterling posted gains on strong economic recovery as the economy re-opens, and is confident to enter into the fourth stage of re-opening on 21st June, despite the Indian variant covid-19 threat. The upbeat economic data overshadowed inflation and new virus variants, keeping the cable on edge against the USD and euro.
Meanwhile, the preliminary data from the UK’s Office of National Statistics (ONS) said that after five months of Brexit, both UK and EU, trade and investments remained largely affected on the negative side. The Q1 trade dropped 23%, compared with 0.8% with the rest of the world.
Having said that, the EU commission defended the Northern Ireland (NI) protocol, calling on the UK government to find out the solutions to iron out the disruption to business caused by the protocol, a key part of the Brexit agreement.
As for now, in the absence of any major fundamental catalyst, the dynamics surrounding the US dollar continue to influence GBP/USD price movement for the time being.
GBP/USD Additional Levels
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