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  • GBP/USD remained under intense selling pressure through the early European session.
  • Rallying US bond yields continued underpinning the USD and was seen exerting pressure.
  • Some repositioning trade ahead of BoE decision further contributed to the heavy selling.

The GBP/USD pair weakened further below the 1.3600 mark and dropped to fresh two-and-half-week lows during the first half of the European session. The pair was last seen trading near the 1.3575 region, down around 0.50% for the day.

The pair witnessed some heavy selling for the second consecutive session on Thursday and extended this week’s rejection slide from the 1.3755-60 supply zone, or multi-year tops. The downfall also marked the fourth day of a negative move in the previous five and was sponsored by sustained US dollar buying interest.

In fact, the key USD index jumped to the highest level in more than two months amid optimism over the US President Joe Biden’s fiscal stimulus plan and improving US economic data. Expectations for a massive government spending pushed the yield on the benchmark 10-year bond 10-month high touched in January.

The USD was further supported by Wednesday’s upbeat US macro releases, which lifted hopes for a strong economic recovery. Apart from this, the decline could also be attributed to some repositioning trade ahead of the Bank of England (BoE) decision, which will be scrutinized for clues about negative interest rates.

The BoE is widely expected to keep its monetary policy settings unchanged. Hence, the key focus will be on the updated economic projections. This will be followed by the post-meeting press conference, where comments by the BoE Governor Andrew Bailey might infuse some volatility around the British pound.

Later during the early North American session, the US Initial Weekly Jobless Claims will also be looked upon for some impetus. This, along with the broader market risk sentiment and US stimulus headlines, will influence the USD price dynamics and assist traders to grab some short-term opportunities.

Technical levels to watch