- GBP/USD witnessed a modest pullback from the vicinity of over one-week tops set on Friday.
- The continuous rise in COVID-19 cases in the UK acted as a headwind for the British pound.
- A combination of factors undermined the USD and helped limit the downside for the major.
The GBP/USD pair remained on the defensive through the mid-European session, albeit lacked any follow-through selling and was last seen hovering around mid-1.3700s.
The pair struggled to capitalize on Friday’s strong positive move to over one-week tops and met with some supply near the 1.3775 region on the first day of a new trading week. The recent surge in new COVID-19 cases in the UK acted as a headwind for the British pound.
According to the official figures released on Sunday, another 33K+ people in Britain tested positive for COVID-19. The country also reported 61 COVID-related deaths, fueling worries about the fast-spreading Delta variant of the coronavirus and undermined the sterling.
However, a subdued US dollar price action helped limit any meaningful slide for the GBP/USD pair, at least for now. Against the backdrop of the underlying bullish sentiment, diminishing odds for an earlier than anticipated Fed lift-off undermined the safe-haven greenback.
During the highly anticipated speech at the Jackson Hole Symposium, Fed Chair Jerome Powell warned of the downside risks posed by the delta variant. Powell reaffirmed that QE tapering would begin later this year but also attempted to de-link tapering from the interest rate hike.
As investors looked past Powell’s remarks, a modest bounce in the US Treasury bond yields extended some support to the greenback and supports prospects for some selling around the GBP/USD pair. That said, absent relevant fundamental triggers held traders from placing fresh bets.
Market participants now look forward to the release of Pending Home Sales data from the US for some impetus. Apart from this, the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and provide some trading impetus to the GBP/USD pair.
Technical levels to watch
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