GBP/USD bounced from a nine-week low on Monday, which it hit during the late phase of the Asian session due to blood clot concerns surrounding AstraZeneca’s COVID-19 vaccine, which is considered key for the United Kingdom’s aggressive vaccination campaign.
However, the Sterling is likely to see short-term support as restrictive measures in the UK are eased further this week, with non-essential stores and pub gardens re-opening.
The latest CFTC data showed that speculators’ net long position on GBP/USD had shrunk to a nine-week low during the week to April 6th. Market players have been net bullish on the Sterling since early December.
Meanwhile, after reaching multi-month highs at the end of March, the US Dollar and US Treasury yields seemed to have paused their rally, with US consumer inflation numbers now being on traders’ radar. Both the dollar and bond yields have been supported by expectations that a speeding up economic recovery from the coronavirus crisis will lead to a faster increase in inflation compared to what Fed policy makers expect.
The latest US macro data showed that producer prices had surged at the fastest annual rate in 9 1/2 years in March, which is another argument in favor of higher consumer inflation as the economy re-opens.
Against a basket of six major peers, the US Dollar was little changed at 92.155 on Monday, after it slipped below the 92.000 mark for the first time since March 23rd last Thursday.
The yield on 10-year US government bonds stood at 1.6745% on Monday after falling to 1.6170% last week. At the end of March, the 10-year yield rose to 1.7760%, or the highest level in over a year.
“Key for the near-term outlook will be whether yields continue to consolidate around these levels, or march higher,” National Australia Bank strategist Tapas Strickland wrote in an investor note.
“The broader thematic of a rapid rebound in the U.S. economy on the back of an impressive vaccine rollout continues,” Strickland also noted.
As of 9:24 GMT on Monday GBP/USD was edging up 0.36% to trade at 1.3752, after earlier touching an intraday low at 1.3669, or its weakest level since February 5th (1.3658). The major currency pair has edged down 0.20% so far in April, following a 1.05% drop in March.
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 11.5 basis points (0.115%) as of 8:15 GMT on Monday, up from 11.2 basis points on April 9th.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 1.3708
R1 – 1.3745
R2 – 1.3788
R3 – 1.3826
R4 – 1.3864
S1 – 1.3664
S2 – 1.3627
S3 – 1.3584
S4 – 1.3541