- GBP/USD was seen consolidating its recent strong gains to the highest level in three years.
- Better-than-expected UK jobs data did little to provide any impetus amid overbought RSI.
- The prevalent USD selling bias, plans to ease lockdown in the UK favours bullish traders.
The GBP/USD pair remained confined in a narrow trading band above mid-1.4000s and had a rather muted reaction to the UK monthly employment details.
Following the recent strong positive move to the highest level in almost three years, the pair now seems to have entered a bullish consolidation phase and seemed unaffected by upbeat UK jobs data. The Office for National Statistics (ONS) showed on Tuesday that the unemployment rate edged higher to 5.1% in December from 5.0% previous. The reading was in line with market expectations and was largely offset by an unexpected drop in the claimant Count.
In fact, the number of people claiming unemployment-related benefits fell by 20K in January as against consensus estimates pointing to an increase by 35K. Adding to this, the previous month’s reading was also revised down to show a decline of 20.4K as against the 7K rise reported earlier. This comes amid the UK government’s plan to ease lockdown measures and the impressive pace of COVID-19 vaccinations in Britain, which continued underpinning the sterling.
It is worth reporting that the UK Prime Minister Boris Johnson on Monday unveiled a new four-step plan to end restrictions by 21 June and lifted hopes for a swift UK economic recovery. Apart from this, the underlying bullish sentiment in the financial markets and fading hopes for a relatively faster US economic recovery kept the US dollar bulls on the defensive. This, in turn, was seen as another factor that extended some additional support to the GBP/USD pair.
The USD languished near six-week lows and failed to gain any respite from the recent runaway rally in the US Treasury bond yields. The US bond market has been reacting to the prospects for the passage of US President Joe Biden’s proposed $1.9 trillion stimulus package. The House Budget Committee on Monday voted to advance the Democrats’ massive coronavirus relief plan and pushed the yield on the benchmark 10-year US government bond to fresh one-year tops.
Market participants now look forward to the release of the Conference Board’s US Consumer Confidence Index for some impetus. The key focus, however, will be on Fed Chair Jerome Powell’s testimony before the Senate Banking Committee. Powell is expected to reassure ultra-accommodative policy stance, which could potentially calm bond markets and further weigh on the greenback. This sets the stage for an extension of the recent appreciating move for the GBP/USD pair.
Technical levels to watch