GBP / USD refreshes session highs, around 1.3815-20 region
- GBP / USD gained ground on Wednesday and moved back above the 1.3800 mark.
- Optimism over the easing of COVID-19 restrictions in the UK has bolstered the pound sterling.
- Moderate USD demand remained support, although risky mood could limit large gains.
- Investors are now eagerly awaiting the minutes of the June FOMC meeting for further directional momentum.
GBP / USD quickly reversed a European session drop and climbed back above the 1.3800 mark, approaching daily highs of the past hour.
The pair drew lower buying near the 1.3775 region on Wednesday and so far appears to have blocked the previous day’s steep retracement decline from around the 1.3900 mark. British Prime Minister Boris Johnson presented plans for the final step in lifting the UK lockdown, which, in turn, was seen as a key factor that has extended some support for the pound. Apart from that, moderate US dollar price action gave the GBP / USD pair a slight boost.
The USD struggled to capitalize on the strong overnight gains and remained on the defensive for the first half of the trade action. Expectations that the Fed will wait longer to cut back on asset purchases or raise interest rates have kept USD bulls from placing aggressive bets. Apart from that, the continued decline in US Treasury bond yields was seen as another factor that weighed on the greenback and exerted some support on the GBP / USD pair.
That said, the prevalent risk mood – amid concerns about the spread of the highly contagious Delta variant of the coronavirus – has extended some support for the safe haven greenback. This could keep a lid on any significant upside for the GBP / USD pair. Investors could also refrain from placing aggressive bets ahead of the release of the June FOMC meeting minutes. It is therefore prudent to wait for solid follow-up buys before positioning for any further appreciation.
As the Fed moved forward with its timeline for the first post-pandemic interest rate hike at the end of the late-June policy meeting, investors will be looking for new clues to the central bank’s policy outlook. This will play a key role in influencing short-term USD price dynamics and help investors determine the next step in a directional move for the GBP / USD pair.