- GBP/USD found some support ahead of the 1.3700 mark and stalled its intraday decline.
- BoE rate hike expectations, weaker USD helped attract some dip-buying at lower levels.
- Brexit jitters capped any further gains amid a break below ascending channel support.
The GBP/USD pair quickly recovered around 30-35 pips from daily lows and was last seen trading with modest losses, just below mid-1.3700s.
The pair extended the previous day's sharp retracement slide from the 1.3825-30 resistance zone and witnessed heavy selling during the first half of the trading action on Wednesday. The downward trajectory drag the GBP/USD pair to over one-week lows during the mid-European session, though lacked follow-through selling.
The intraday bounce followed the UK finance minister Rishi Sunak's upbeat economic assessment while presenting the annual government budget. Office for Budget Responsibility (OBR) sees UK GDP will return to the pre-crisis level at the turn of the year and expand 6.5% in 2021. OBR forecasts show GDP growth of 6% and CPI of 4% in 2022.
This reinforced market expectations about an imminent Bank of England rate hike move at the upcoming policy meeting next week and extended some support to the British pound. This, along with the emergence of fresh selling around the US dollar, assisted the GBP/USD pair to find decent support ahead of the 1.3700 mark.
The USD was pressured by an extension of the recent decline in the US Treasury bond yields, which fell for the fourth successive day. In fact, the yield on the benchmark 10-year US government bond slipped below the 1.60% threshold and undermined the greenback, which failed to gain any traction following the release of Durable Goods Orders.
Despite the supporting factors, the attempted recovery witnessed around the GBP/USD pair lacked bullish conviction amid fresh Brexit jitters. In the latest developments, the UK Prime Minister said on Wednesday that conditions had been met to invoke Article 16 unless they see rapid progress on the Northern Ireland protocol.
Even from a technical perspective, the GBP/USD pair has broken through support marked by the lower boundary of an upward sloping channel extending from September swing lows. The technical set-up supports prospects for further losses, suggesting that any further recovery might still be seen as a selling opportunity.