- A combination of factors failed to assist GBP/USD to capitalize on its intraday positive move.
- COVID-19 jitters, softer UK GDP print weighed on the sterling amid a modest USD strength.
- Investors now look forward to the US macro data for some impetus ahead of Friday’s NFP.
The GBP/USD pair retreated around 35-40 pips from Asian session swing highs and dropped to fresh daily lows, around the 1.3820-15 region in the last hour.
The pair struggled to capitalize on its intraday positive move, instead met with some fresh supply near the 1.3860 region and was pressured by a combination of factors. Against the backdrop of the dovish Bank of England, worries about the spread of the more contagious Delta variant of the coronavirus acted as a headwind for the British pound.
According to the official figures released on Tuesday, Britain reported another 20,479 coronavirus cases and recorded 23 deaths in the latest 24-hours. Adding to COVID-19 woes, Hong Kong said on Monday that it will ban all passenger flights from the UK starting this Thursday as it seeks to curb the spread of new variants of the coronavirus.
On the other hand, the US dollar remained supported by speculations that the Fed will tighten its monetary policy if price pressures continue to intensify. Adding to this, Richmond Federal Reserve President Thomas Barkin said that the Fed has made substantial further progress toward its inflation goal to begin tapering asset purchases.
The already stronger greenback was further underpinned by Tuesday's upbeat US Consumer Confidence Index, which soared to a fresh pandemic high in June. The data pointed to growing optimism above the economy and helped offset a softer tone surrounding the US Treasury bond yields. This, in turn, was seen as another factor exerting pressure on the GBP/USD pair.
Meanwhile, Wednesday's weaker-than-expected UK GDP print, showing that the economy contracted by 1.6% in Q1 as against 1.5% estimated previously, did little to lend any support. From current levels, a subsequent fall back towards the 1.3800 mark, en-route monthly swing lows near the 1.3785 region, looks a distinct possibility.
Moving ahead, market participants now look forward to the US economic docket – featuring the release of ADP report on private-sector employment, Chicago PMI and Pending Home Sales. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to the GBP/USD pair. The key focus, however, will remain on Friday's US monthly jobs report (NFP).