GBP/USD remains depressed near daily low, around 1.0800 amid resurgent USD demand
- GBP/USD meets with a fresh supply on Thursday and erodes a major part of the previous day’s gains.
- The reaction to the BoE’s move to buy government bonds fades amid concerns about rising UK debt.
- A goodish pickup in the US bond yields revives the USD demand and contributes to the intraday slide.
The GBP/USD pair struggles to capitalize on the previous day's strong rally of over 175 pips and comes under renewed selling pressure on Thursday. The intraday downfall extends through the early European session and drags spot prices momentarily below the 1.0800 mark.
The overnight reaction to the Bank of England's intervention fizzles out rather quickly amid the lack of confidence in the UK government’s ability to manage the ballooning public debt. This continues to undermine the British pound, which, along with the emergence of some US dollar dip-buying, is exerting downward pressure on the GBP/USD pair.
It is worth mentioning that the UK central bank announced on Wednesday that it will start buying long-dated UK government bonds to help restore orderly market conditions. The move, however, fails to ease jitters over the UK’s tax-cut plan, which could stretch Britain's finances to their limits and derail the BoE's efforts to contain sky-high inflation.
The USD, on the other hand, stalls its sharp retracement slide from a new two-decade high touched on Wednesday amid a goodish pickup in the US Treasury bond yields. Growing acceptance that the Fed will continue to hike interest rates at a faster pace to combat stubbornly high inflation continues to act as a tailwind for the US bond yields and the greenback.
The GBP/USD pair, meanwhile, erodes a major part of the previous day's gains and for now, seems to have snapped a two-day winning streak. In the absence of any relevant economic data from the UK, traders on Thursday will take cues from a speech by BoE Deputy Governor David Ramsden. Apart from this, the US macro releases would be looked upon for a fresh impetus.
The US economic docket features the release of the final Q2 GDP print and the usual Weekly Initial Jobless Claims data later during the early North American session. This, along with speeches by influential FOMC members and the US bond yields, will drive the greenback demand and contribute to producing short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
