- GBP/USD witnessed an intraday turnaround from levels beyond the 1.4200 mark.
- Some cross-driven weakness stemming from EUR/GBP exerted some pressure.
- The prevalent USD selling bias should help limit any meaningful corrective slide.
The GBP/USD pair witnessed some selling heading into the North American session and refreshed daily lows, around the 1.4135 region in the last hour.
Having struggled to find acceptance above the 1.4200 mark, the pair witnessed a dramatic intraday turnaround and has now retreated around 75 pips from daily swing highs. The pullback lacked any obvious fundamental catalyst and could be solely attributed to some cross-driven weakness from a strong move up in the EUR/GBP cross.
Bulls seemed rather unaffected by the prevalent selling bias surrounding the US dollar. Investors now seem convinced with the Fed’s stubbornly dovish view that any spike in inflation would be transitory and have been scaling back their bets for an earlier than anticipated lift-off. This, in turn, continued acting as a headwind for the USD.
Dovish Fed expectations were evident from the ongoing downfall in the US Treasury bond yields. Apart from this, the risk-on environment – as depicted by an extended rally in the global equity markets – further undermined the safe-haven greenback. This should hold bearish traders from placing aggressive bets around the GBP/USD pair and help limit the downside.
This, along with the upbeat outlook for the UK economic recovery from the pandemic, supports prospects for the emergence of some dip-buying at lower levels. Hence, it will be prudent to wait for some strong follow-through selling below the 1.4100 mark before confirming that the GBP/USD pair has topped out and positioning for any further depreciating move.
Market participants now look forward to the US economic docket, highlighting the release of the Conference Board’s Consumer Confidence Index, New Home Sales and Richmond Manufacturing Index. Traders might further take cues from a scheduled speech by the Fed Governor Randal Quarlesto to grab some short-term opportunities around the GBP/USD pair.