- GBP/USD gained traction on Wednesday and recovered a major part of the overnight losses.
- Some cross-driven strength from a fall in the EUR/GBP extended some support to the major.
- Hawkish Fed expectations, stronger US ADP report underpinned the USD and capped gains.
The GBP/USD pair maintained its bid tone through the early North American session, albeit has retreated few pips from daily tops and was last seen trading around mid-1.3800s.
As investors looked past Wednesday's softer UK GDP print, the GBP/USD pair attracted some buying near the 1.3815 region and has now reversed the previous day's losses to over one-week lows. The uptick lacked any obvious fundamental catalyst and could be solely attributed to some cross-driven strength stemming from an intraday turnaround in the EUR/GBP pair.
Bulls further took cues from hawkish remarks by the Bank of England Chief Economist, Andy Haldane, saying that rising inflationary pressures call for immediate thought, and action, on unwinding the QE. Haldane expects UK inflation to be nearer to 4% by the end of the year than 3% and avoiding inflation surprise is one of the key tasks of the central bank.
Meanwhile, the supporting factor, to a larger extent, was offset by worries about the spread of the more contagious Delta variant of the coronavirus. This, along with a mildly bid tone surrounding the US dollar strength, held traders from placing any aggressive bullish bets and kept a lid on any further gains for the GBP/USD pair, at least for the time being.
The USD held on to its modest gains following the release of the ADP report, which showed that private-sector employers added 692K new jobs in June. This marked a notable deceleration from the previous month's blowout reading of nearly one million but was still better-than-consensus estimates pointing to a reading of 600K.
Meanwhile, a fresh leg down in the US Treasury bond yields capped any meaningful upside for the greenback and continued lending some support to the GBP/USD pair. Wednesday's US economic docket also features the release of Chicago PMI and Pending Home Sales. The key focus, however, will remain on Friday's US monthly jobs report, popularly known as NFP.
