- GBP/USD stalls after the previous day’s sharp rise.
- Uptick in US treasury yields lift demand for the US dollar
- GBP remains under pressure amid Brexit chaos and delayed economic reopening.
The appreciative move in the US dollar keeps GBP/USD gains under check. The pair accumulated stellar gains on Monday after the heavy losses incurred in the previous weeks. However, it lacks the strength to hold onto the gains.
At the time of writing, GBP/USD trades at 1.3916, down 0.10% for the day.
The US Dollar Index (DXY), which tracks the performance of the greenback against its six major rivals, is little changed at 91.93 with 0.03% gains. The DXY declined 0.52% in the previous session after retracing from two months high.
The US 10-year benchmark yields stood at 1.49% with 0.59% gains as investors continued to digest the impact of the Fed’s hawkish tone in the last week and as pressure mounted due to reflation trades.
In the meantime, Fed Chair Jerome Powell in his remark prepared ahead of a House hearing today stated that the central bank will continue to support the economy.
In addition to that, St. Louis Fed President James Bullard commented that the first increase could come as soon as next year. New York Fed President John Williams said economic data and conditions have not progressed much to shift FOMC’s monetary policy stance. The dollar gained on the volatility following mixed comments from Fed officials.
On the other hand, the British pound remains pressurized due to the delay in ending all COVID-19 restrictions on June 21. The decision could impact sterling’s valuation negatively for the time being.
Meanwhile, UK Prime Minister Boris Johnson said at a news conference that he is now looking to July 19 as the next date to uplift all the restrictions.
In addition, the Brexit saga continues to weigh on the performance of the cable as there was no breakthrough on the deadlock following the G7 summit. UK Brexit Minister David Frost is due to meet his EU counterpart Maros Sefcovic this week.
Market participants look forward to the US Existing Home Sales data, Richmond Fed Manufacturing Index, and Fed Chair Powell Testimony to gain some fresh trading impetus.