GBP/USD struggles to hold up against dollar strength amid Powell's testimony, mixed US data
|- GBP/USD has been falling some 40 pips from the highs as the dollar gains ground.
- Mostly worse-than-expected US data and uncertainty stemming from Powell weigh on sentiment.
- UK covid figures are eagerly awaited after Wednesday's leap.
Back to the drawing board – GBP/USD has dropped to around 1.3850, nearly unchanged on the day. The safe-haven US dollar has been gaining ground as part of a broader risk-off mood stemming from several factors.
Federal Reserve Chair Jerome Powell has told Senators that he is unsure how far the Labor Force Participation Rate (LFPR) can go. Fewer Americans are participating in the workforce after the pandemic broke out. Moreover, Powell said that the current increase in inflation is unique and that the Fed has a challenging task.
The Fed Chair's uncertainty is adding to the concerned market mood, supporting the dollar. On Wednesday, Powell stressed it is still too early to taper bond buys, sending the dollar down.
Figures coming from the central bank earlier on Wednesday were mixed. The Philly Fed Manufacturing Index missed projections with 21.9 points while the parallel Empire State one beat forecasts with 43 points.
US jobless claims marginally missed estimates with 360,000 according to data released for the week that ended on July 9. Another disappointment came from industrial output, which rose by 0.4% in June, below expectations as well.
Cable has fully pared gains resulting from Bank of England member Michael Saunders' hawkish comments. Saunders urged cutting short the BOE's bond-buying program and eventually raising interest rates, contrasting Governor Andrew Bailey. His remarks came after the UK reported an increase of 7.3% YoY in wages in May, which could turn into inflationary pressures down the road.
Looking forward, additional headlines from Fed Chair Powell are awaited in the US, while UK COVID-19 statistics are also awaited. Britain reported over 42,000 infections on Wednesday showing a rapid increase. On the other hand, hospitalizations and mortalities are advancing at a modest pace. The UK is set to abandon almost all covid restrictions on Monday.
GBP/USD has hit a daily low of 1.3813 and peaked out at 1.3898. Here are technical levels to watch:
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