GBP/USD is slowly but steadily losing ground as risk aversion fuels the dollar’s demand.
The GBP/USD pair turned south and trades a handful of pips below the 1.1800 level, not far above a fresh multi-month low of 1,1716 posted on Tuesday. The greenback regains its dominance across the FX board, following a short-lived knee-jerk on Tuesday, following the release of tepid US growth-related figures. The S&P Global flash estimates for August hinted at a sharp deceleration in business activity.
Nonetheless, bets for a US Federal Reserve 75 bps hike in September are back above 50%, according to the latest available data. Furthermore, the central bank will shortly begin doubling the pace of its balance sheet reduction, further draining the massive liquidity used to deal with the early stages of the pandemic.
The American currency is finding near-term support in raising government bond yields, which hover at fresh weekly highs. The 10-year Treasury note is currently yielding 3.055%, while the 2-year note yields 3.329%.
The British pound, on the other hand, draws some support from the prospects for a 50 bps rate hike by the Bank of England in September. This, in turn, helps offset the negative factors and limits the downside for the GBP/USD pair. That said, rising concerns over the UK cost of living crisis and recession fears seem to cap gains.
Market participants also seem reluctant to place aggressive bets ahead of Fed Chair Jerome Powell’s appearance at the Jackson Hole symposium on Friday. Powell’s remarks will be scrutinized for clues about the possibility of a supersized 75 bps rate hike in September, which will influence the USD and provide a fresh impetus to the GBP/USD pair.
In the meantime, traders on Wednesday will take cues from the US economic docket – featuring Durable Goods Orders and Pending Home Sales data later during the early North American session. This, along with the US bond yields, might drive the USD demand. Apart from this, the broader risk sentiment could produce short-term opportunities around the GBP/USD pair.
EUR/USD retreats toward 0.9900 after US data
EUR/USD remains under bearish pressure on Wednesday and continues to push lower toward 0.9920. The data from the US showed that Durable Goods Orders Ex-Defense rose by 1.2% in July, helping the dollar preserve its strength ahead of Pending Home Sales data.
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GBP/USD drops to fresh daily lows below 1.1800
GBP/USD has lost its traction and declined to a fresh daily low below 1.1760 in the early American session on Wednesday. The upbeat Durable Goods Orders data from the US seems to be supporting the greenback as investors await July housing data.
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Gold retreats below $1,750 as US yields rebound
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