- GBP/USD nurses its wounds on Wednesday in early European trading hours.
- Higher US Treasury yields underpins the demand for the US dollar.
- Investors sidelined the British pound on gas shortage, higher inflation concerns, economic slowdown and Brexit woes.
The GBP/USD pair remains muted following the previous day’s downfall. The pair crumbled below 1.3600 for the first time since July on fresh strength in the greenback and the UK domestic factors,which acted as headwind for the sterling. At the time of writing, GBP/USD is trading at 1.3546, up 0.07% for the day.
Investors ditched risky assets in the wake of China’s Evergrande default risk and growing concerns on the pace of global economic recovery. Dow Jones lost almost 570 points whereas Nasdaq fell more than 2% since March. The risk sentiment cooled down a little after Evergrande Group said it plans to sell a $1.5 billion stake in Shengjing Bank ltd. It is worth mentioning that S&P 500 Futures is trading at 4,365.50 with 0.51% gains.
The US Dollar Index (DXY) trades, which tracks the performance of the greenback against its six major rivals, pares some of its earlier gains and retreats slightly below 93.70. Earlier in the day, the greenback zoomed to its highest in more than 10-months, tracing the rise in US Treasury bond yields. The US benchmark 10-year Treasury yields rose to 1.54% and continued to feed on the US Federal Reserve hawkish stance.
The gains were contained further for the US dollar as US Senate Republicans blocked a bid by the US President Joe Biden’s Democrats to head off a potentially crippling US credit default.
Meanwhile, St. Louis President James Brian Bullard forecasted 5.8% US Gross Domestic Growth (GDP) for 2021.
On the other hand, the British pound struggled with many of its domestic factors starting with a surge in gas prices with a run on fuel stations. Furthermore, the sharp rise in gas and fuel prices heightens inflationary concerns and economic slowdown fears.
As for now, traders keep their focus on the release of the UK’s Bank of England (BOE) Consumer Credit, and the US and the UK central banks’ officers' speeches to gauge the market sentiment.
