- A combination of supporting factors assisted GBP/USD to gain positive traction on Monday.
- The UK political drama held bulls from placing aggressive bets and capped gains for the pair.
- Investors now look forward to the US economic docket for some short-term trading impetus.
The GBP/USD pair surrendered a major part of its intraday gains and was last seen hovering near the lower end of its daily trading range, just above the 1.3400 mark.
A combination of supporting factors assisted the GBP/USD pair to gain positive traction for the second successive day on Monday and recover further from over one-month low touched last week. The US dollar witnessed some profit-taking from a one-and-half year high amid the continued flattening of the US Treasury yield curve.
Hawkish comments by Atlanta Fed President Raphael Bostic over the weekend bolstered bets of aggressive policy tightening by the Fed and dampened future growth expectations. This is playing out in the money markets, where the spread between two and ten-year US government bonds fell below 59 bps for the first time since early November.
On the other hand, expectations that the Bank of England will hike interest rates at its meeting on Thursday underpinned sterling and provided an additional boost to the GBP/USD pair. Bulls, however, seemed reluctant ahead of the report into alleged lockdown-busting parties at Downing Street, expected to be released later today.
Apart from this, traders on Monday will take cues from the US economic docket – featuring the release of the Chicago PMI. This, along with the US bond yields, will influence the USD price dynamics. Apart from this, the UK political developments should allow traders to grab some short-term opportunities around the GBP/USD pair.
Technical levels to watch
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