GBP/USD finds buyers near 1.3935, despite firmer USD
- DXY near 3-month tops, will the bounce sustain?
- Higher T-yields-led risk-aversion grips Europe, further declines on cards.
The GBP/USD pair stalled its recovery mode in early Asia and from there resumed its recent downtrend, hitting the daily lows at 1.3935 levels before attempting a minor-recovery to regain the 1.3950 barrier.
However, the overall sentiment remains downbeat amid strengthening demand for the greenback across its main competitors, as the 10-year Treasury yields build gains above the $ 3 percent mark. The recent series of upbeat US economic data points to strengthening economic outlook for the US, as markets bump up expectations for a June Fed rate hike.
Meanwhile, looming uncertainty over Brexit negotiations, with the Irish border issue still a major concern with the EU, the bearish pressure on the pound is unlikely to ease any time so. More so, dwindling May BOE rate hike bets, in the wake of poor UK fundamentals, also adds to the weight on Cable.
Furthermore, risk-off trades on the European equities amid concerns over rising borrowing costs, with the 10-year rates at the highest levels since Jan 2014, keep the downside risks intact.
In absence of fresh fundamental catalysts and amid holiday-thinned quiet trading, the pair will continue to track the moves in the US Treasury yields.
GBP/USD levels to watch
Analysts at Scotia bank noted: “The GBP sell-off is perhaps due to a modest recovery possibly towards the 1.4010/20 area. However, the broader technical picture suggests the GBP is liable to remain soft and may still head for a test of the mid/upper 1.37s after last week’s tumble from the upper 1.43s."