GBP/USD rebounds from one-week lows, back above mid-1.3800s ahead of US data
- GBP/USD witnessed some follow-through selling for the third straight session on Tuesday.
- Vaccine fears weighed on investors’ sentiment and benefitted the safe-haven greenback.
- Softer US bond yields any strong gains for the USD and helped limit losses for the major.
- Investors look forward to US Retail Sales for some impetus ahead of the FOMC and BoE.
The GBP/USD pair maintained its offered tone through the mid-European session, albeit has managed to rebound over 40 pips from one-week lows. The pair was last seen trading just below mid-1.3800s, still down around 0.30% for the day.
The pair extended last week's rejection slide from the key 1.4000 psychological mark and continued losing ground for the third consecutive session on Tuesday. Investors turned cautious following the suspension of the Oxford/AstraZeneca coronavirus vaccine in several European nations. This, in turn, benefitted the safe-haven US dollar and exerted some pressure on the GBP/USD pair.
The greenback was further underpinned by the optimistic US economic outlook, bolstered by the passage of a massive $1.9 trillion stimulus package. That said, a softer tone surrounding the US Treasury bond yields held the USD bulls from placing aggressive bets. This was seen as the only factor that assisted the GBP/USD pair to find some support ahead of the 1.3800 mark.
Expectations about a relatively faster US economic recovery forced investors to start pricing in a possible uptick in US inflation. This further raised doubts that the Fed would retain ultra-low interest rates for a longer period and pushed the yield on the benchmark 10-year US government bond to over one-year tops, or levels just above 1.6% last week.
However, expectations that the Fed could take some action to curb the recent sharp rise in long-term borrowing cost provided some respite to bond traders and led to a modest slide in the US bond yields. Hence, the key focus will remain on this week's key central bank events – the FOMC monetary policy decision on Wednesday and the Bank of England meeting on Thursday.
In the meantime, market participants are likely to take cues from Tuesday's release of the US monthly Retail Sales data. Apart from this, the US bond yields might influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.
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