GBP/USD reverses a dip to sub-1.2200 levels, fresh 5-month lows ahead of UK jobs data

• GBP/USD remains depressed through the early European session on Tuesday.
• Rebounding US bond yields underpinned the USD and exerted some pressure.
• The UK government’s approach to coronavirus pandemic also weighed on the GBP.

The GBP/USD pair momentarily slipped below the 1.2200 round-figure mark, or fresh five-month lows in the last hour, albeit quickly recovered few pips thereafter.

Following the previous session’s intraday pullback from levels beyond the 1.2400 round-figure mark, the pair witnessed some follow-through selling on Tuesday and was being weighed down by a combination of factors.

A modest recovery in the global risk sentiment allowed the US Treasury bond yields to recover a part of the previous day’s steep decline, led by the Fed’s decision to slash interest rates to zero and introduce a massive bond-buying program.

A goodish pickup in the US bond yields helped revive the US dollar demand. This coupled with the UK government’s controversial measures of fighting the coronavirus pandemic weighed on the British pound and prompted some fresh selling.

It is worth recalling that the UK plans to isolate people aged over 70 and let the disease spread. The idea is called ‘herd immunity’ and is based on the assumption that if most of the population is infected and become immune, it provides protection for those who are not immune.

However, the fact that not enough is known about the deadly virus, the UK’s decision to aim for mass immunity could pose a serious risk for the domestic economy and eventually held the GBP bulls on the defensive.

The downside, however, remained cushioned, at least for the time being, and the pair managed to rebound around 40-50 pips from daily lows as investors seemed reluctant to place any aggressive bearish bets ahead of the UK employment details.

This will be followed by the release of the US monthly retail sales figures later during the early North-American session, which might influence the USD price dynamics and contribute towards producing some meaningful trading opportunities.

Technical levels to watch