GBP/USD remains confined in a range below 1.3700, NFP eyed for fresh impetus

• GBP/USD struggled to build on the previous day’s post-BoE strong recovery momentum.
• Investors now seem to have moved on the sidelines ahead of the US monthly jobs report.

The GBP/USD pair remained confined in a range through the early European session and was last seen trading around the 1.3675-80 region.

The pair failed to capitalize on the previous day’s post-BoE strong rally and witnessed a subdued price action on the last day of the week. At the end of its first meeting for the year, the BoE projected GDP to recover rapidly towards pre-pandemic levels over 2021 and inflation to rise quite sharply towards the 2% target in the spring.

Adding to this, the UK central bank pushed back expectations for negative interest rates, which, in turn, prompted some aggressive short-covering around the British pound. The GBP/USD pair recovered swiftly from two-and-half-week lows, around the 1.3565 region and jumped around 135 pips in reaction to the BoE’s hawkish economic assessment.

As investors looked past the BoE event, the momentum lacked any strong follow-through amid sustained US dollar buying, supported by the recent surge in the US Treasury bond yields. The US bond market has been reacting to the prospects for a massive US fiscal spending and pushed the yield on the benchmark 10-year bond closer to 10-month tops touched in January.

The greenback got an additional boost from the incoming positive macro data, which has been fueling optimism about a stronger economic recovery amid progress with coronavirus vaccinations. The USD now seems to have entered a bullish consolidation phase near the highest level in more than two months as the focus now shifts to the US monthly jobs report (NFP).

This, in turn, was seen as one of the key factors that extended some support to the GBP/USD pair. That said, the upside is likely to remain capped as investors are likely to refrain from placing any aggressive bets heading into the key data risk, due later during the early North American session on Friday.

Technical levels to watch