- GBP/USD witnessed some selling for the second consecutive session on Monday.
- Brexit-related uncertainties turned out to be a key factor that weighed on the GBP.
- Sliding US bond yields, risk-on mood undermined the USD and helped limit losses.
The GBP/USD pair maintained its offered tone through the mid-European session and was last seen hovering near the lower end of the daily trading range, around the 1.4130-25 region.
The pair extended the previous session’s retracement slide from the 1.4235 region, or three-year tops and witnessed some selling for the second consecutive session on Monday. In the absence of any fresh fundamental developments, fears over the long-term impact of Brexit and the economic damage from the pandemic acted as a headwind for the British pound. That said, a combination of factors helped limit any deeper losses for the GBP/USD pair.
Investors remain optimistic about the UK economic outlook amid the impressive pace of coronavirus vaccinations and the easing of lockdown measures. According to the official data, more than 70% of adults have received their first dose while some 22 million have received their second dose. This, along with the effectiveness of COVID-19 vaccines against the Indian variant, bodes well with the UK government’s plan to end restrictions fully on June 21.
On the other hand, the ongoing decline in the US Treasury bond yields kept the US dollar bulls on the defensive. Apart from this, the underlying bullish sentiment in the equity markets further acted as a headwind for the safe-haven greenback. Even expectations that the Fed was set to start tapering its bond-buying program sooner rather than later also did little to provide any respite to the USD. This was seen as another actor that helped limit losses for the GBP/USD pair.
There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, the key focus will be on a scheduled speech by the Bank of England Governor Andrew Bailey, who along with other Monetary Policy Committee members will testify before the Treasury Select Committee later during the North American session. The incoming headline will influence the GBP price dynamics and produce some trading opportunities around the GBP/USD pair.
Technical levels to watch
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