- GBP/USD failed to preserve upbeat UK PMI-inspired modest intraday gains to the 1.4200 mark.
- A combination of factors continued underpinning the USD and capped the upside for the major.
- Better-than-expected US ADP report, jobless claims did little to provide any meaningful impetus.
The GBP/USD pair struggled to capitalize on its intraday positive move and has now retreated over 50 pips from daily swing highs. The pair has now dropped to the lower end of its daily trading range and was last seen hovering around mid-1.4100s post-US ADP report.
The pair reversed an intraday dip and built on the previous day’s rebound from the vicinity of the 1.4100 mark. The intraday move up was led by upbeat UK Services PMI, which was revised higher and finalized at 62.9 for May as against 61.8 flash estimates. The data added to the optimistic outlook for the UK economic recovery and provided a modest lift to the British pound.
The pair rallied over 50 pips from the early European session lows, albeit struggled to capitalize on the move beyond the 1.4200 mark amid a modest US dollar strength. Investors have started getting nervous amid speculations that the incoming stronger economic data might force the Fed to begin tapering its bond-buying program. This, in turn, prompted some short-covering around the greenback.
The USD was also supported by a modest pickup in the US Treasury bond yields and a sharp pullback in the US equity markets. Apart from this, a stronger-than-expected ADP report on the US private-sector employment further underpinned the buck and turned out to be a key factor behind the latest leg down during the early North American session, though the downside is likely to remain cushioned.
The Automatic Data Processing (ADP) reported this Thursday that the US private-sector employers added 978K jobs in May, much higher than 650K anticipated. The upbeat headline print, to some extent, was offset by a downward revision of the previous month’s reading to 654K from 742K reported previously. Separately, the US Initial Weekly Jobless Claims fell to 385K in the last week from 405K.
The market reaction to the data, however, turned out to be muted as the focus remains on Friday’s release of the closely-watched US monthly jobs report (NFP). This would drive expectations for the upcoming FOMC meeting later this month, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.
Technical levels to watch
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