- Pound drops during the American session across the board.
- US dollar holds onto modest gains even as US yield decline.
The GBP/USD pair retreated further from the 1.3700 area and printed a fresh daily low during the American session at 1.3620. Cable is trimming some of Tuesday’s gains after being unable to make a run above 1.3700 and amid a US dollar recovery.
The greenback recovered strength and the DXY rose back to the area of the daily high near 90.30. The gains were modest as Wall Street trades mixed and despite the decline in US yields. The 10-year yield fell to 1.09%, the lowest since January 8.
Economic data from the US showed annual CPI stood at 1.4% in December, slightly above the 1.3% expected. Attention now turns to the Fed’s Beige Book. Traders also keep an eye on US politics.
The pound was among the top performers still boosted by yesterday’s comments from Bank of England governor Andrew Bailey who was cautions about negative interest rates. On Wednesday, reports about vaccines in the UK also offered support to the pound that printed monthly highs versus the euro before pulling back. The latest COVID numbers in the UK showed an increase in cases (47K vs 45K) that remain far from the recent highs; on the negative front deaths (1,564) hit a record.
From a technical perspective, the GBP/USD is correcting lower after hitting again a strong barrier at the 1.3700. The pound needs to break in order to clear the way to more gains. On the downside, a break under 1.3620 would expose 1.3600. The negative tone is likely to persist while under 1.3660.