Forex Market: GBP/USD retreats for a third day as concerns over recovery support safe haven dollar

GBP/USD kept trading at a short distance away from Thursday’s lows on Friday, as the US Dollar seemed to have retained its safe haven appeal amid a sharp rise in US COVID-19 cases that put the reopening of the economy in question.

New daily cases across the United States rose at a record pace on Thursday, by at least 39,800, while states such as Texas reported record hospitalizations for 13 consecutive days. Texas Governor Greg Abbott temporarily postponed the reopening of the state in order to “corral the spread until we can safely enter the next phase of opening our state for business.”

Yesterday’s government data showed employers continued to shed jobs due to weak demand over a month after non-essential businesses had reopened. The number of people filing for unemployment assistance eased to 1.480 million during the business week ended June 19th, but still remained more than double its peak during the 2007-2009 financial crisis. The total claims reported since March 21st rose to 47.3 million.

Meanwhile, a separate report showed US economy had contracted at a final annualized rate of 5% during the first quarter, while confirming the second GDP estimate, which put an end to the longest period of expansion in the US history.

As of 7:14 GMT on Friday GBP/USD was edging down 0.15% to trade at 1.2401, after earlier touching an intraday low of 1.2398, or a level not far from Thursday’s low. The major pair has trimmed gains for the current week, now being up 0.43%, following two successive weeks of losses.

In terms of economic calendar, at 12:30 GMT the US Bureau of Economic Analysis is expected to report on core PCE inflation for May. The Core Personal Consumption Expenditure (PCE) Price Index, which does not include prices of food and energy and represents the Federal Reserve’s preferred measure of inflation, is expected to increase 0.9% year-on-year in May. Annual core PCE inflation was reported at 1.0% in April, or the 15th consecutive month when core inflation was below Fed’s 2% target. Personal income probably decreased 6% in May from a month ago, while personal spending probably rose at a monthly rate of 9%, according to market expectations.

Additionally, the monthly survey by Thomson Reuters and the University of Michigan may show that US consumer confidence continued to improve in June. The final index reading, which usually comes out two weeks after the preliminary data, probably came in at 79.0, up from a preliminary value of 78.9. Outlook for personal finances improved, but respondents did not expect favorable economic conditions to reestablish anytime soon, preliminary data showed. In May, the consumer sentiment index stood at a final 72.3. The final report for June is due out at 14:00 GMT.

Bond Yield Spread

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled 26.3 basis points (0.263%) as of 6:15 GMT on Friday, down from 26.7 basis points on June 25th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.2424
R1 – 1.2459
R2 – 1.2500
R3 – 1.2535
R4 – 1.2570

S1 – 1.2384
S2 – 1.2349
S3 – 1.2309
S4 – 1.2268