The British pound is down sharply on Thursday, as the US dollar has recorded broad gains. GBP/USD is currently trading at 1.3649, down 0.75%.
US dollar on a roll
The US dollar has extended its gains on Thursday, pushing the pound into 1.36-territory. The pound is having a rough week and is down 1.6%. Investors have been flocking to the safe-haven US dollar, as risk appetite has eroded due to surging infections rates of the delta variant of Covid. This has led to renewed lockdowns and health restrictions and could hamper the nascent global recovery.
The FOMC minutes did not spell out any timeframe for a tapering, but members signalled that a taper was just a question of time. The markets viewed this as a hawkish stance and the US dollar extended its gains in what has been an excellent week for the greenback.
The minutes indicated that most members favor a taper before the end of the year. Members noted that the inflation goal had been reached, making tapering possible, but that employment had not met the Fed’s benchmark of “substantial further progress”, and there would be no rate hike until this goal was achieved. The Fed has repeatedly stated that it does not plan to raise rates before tapering is completed, but felt the need to emphasize in the minutes that there was no mechanical link between tapering and rate hikes. With investors on guard for further tapering signals, the outlook for the US dollar in the near-term is positive.
The UK releases Retail Sales data on Friday, and the July MoM readings are expected to remain close to the June readings (0.3% for Headline Retail Sales, 0.4% for Core Retail Sales). If the readings are not within expectations, we could see some movement from the pound.
GBP/USD Technical Analysis
- GBP/USD continues to lose ground and break below support levels. The pair is testing support at 1.3659 Below, there is support at 1.3409
- There is resistance at 1.3810, followed by 1.3913
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