GBP/USD spikes to 1.3900 neighbourhood amid notable USD weakness
|- GBP/USD added to its intraday gains and refreshed daily tops amid a broad-based USD selling.
- Dovish comments by Fed Chair Jerome Powell, sliding US bond yields undermined the buck.
- Bulls might still wait for a sustained move beyond the 1.3900 mark before placing fresh bets.
The intraday USD selling picked up pace during the early North American session and pushed the GBP/USD pair to fresh daily tops, closer to the 1.3900 mark in the last hour.
The pair caught some aggressive bids near the 1.3800 level on Wednesday and has now recovered its weekly losses recorded over the past two trading sessions. The British pound found some support following the release of hotter-than-expected UK consumer inflation figures. This, along with the emergence of some heavy selling around the US dollar, contributed to the GBP/USD pair's strong intraday positive move.
The already weaker USD lost some additional ground following the release of Fed Chair Jerome Powell's prepared remarks for delivery to the House Financial Services panel. Powell said that inflation is likely to remain elevated in the coming months but will fade away. This, in turn, forced investors to scale back their expectations for an earlier than anticipated monetary policy tightening by the Fed.
The markets now seem convinced that the Fed would wait for a longer period before tapering its asset purchases or raising interest rates. This was reinforced by a sharp intraday fall in the US Treasury bond yields. Apart from this, a turnaround in the risk sentiment exerted some additional downward pressure on the safe-haven greenback, which failed to benefit from a sharper than expected rise in the US Producer Price Index.
Data published by the US Bureau of Labor Statistics showed the US PPI for final demand rose to 7.3% on a yearly basis in June from 6.6% in May. Further details of the publication revealed that the annual Core PPI advanced to 5.6% from 4.8% in May, surpassing analysts' estimate of 5.1%.
It will now be interesting to see if bulls are able to capitalize on the momentum or the GBP/USD pair continues with its struggle to find acceptance above the 1.3900 mark. The key focus will remain on Fed Chair Jerome Powell's semi-annual congressional testimony, which will continue to influence the USD price dynamics and provide some impetus to the GBP/USD pair.
Technical levels to watch
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