GBP/USD extended last Friday’s losses at the start of the new week, mostly due to a firmer US Dollar. The Sterling seemed to have shown little reaction to news that the British government will probably defer the end of coronavirus-related social restrictions.
PM Boris Johnson is expected to announce a delay of four weeks to the schedule he had disclosed in February, under which all social restrictions in the country were supposed to be lifted as early as June 21st.
According to ING analysts, the delay is no surprise to market players, with focus being set mostly on macro data.
“We do not think this does too much damage to GBP, which instead will be focused on fresh macro updates on jobs and retail sales – both expected to be GBP supportive,” ING wrote.
Bank of England Governor Andrew Bailey is scheduled to speak later on Monday, while GBP traders will be looking for any signals on policy direction. BoE policymakers are expected to meet on June 24th.
Meanwhile, after recording its largest weekly gain in over a month against a basket of six major peers, the US Dollar was a notch stronger on Monday as market players exited their USD short positions in anticipation of the outcome of the Federal Reserve’s two-day policy meeting. The DXY was gaining 0.10% on the day to 90.565.
Investors will be looking for fresh clues over the timing of Fed’s move to tighten ultra-easy monetary policy.
“The dollar repositioning shows some nerves heading into the FOMC policy update,” NAB strategist Jason Wong wrote in an investor note, cited by Reuters.
“Over the past month there appears to have been a growing chorus that the time to talk about tapering bond purchases had been reached,” he added.
The latest CFTC data showed that speculative net dollar short positions had reached a three-month high of $18.35 billion during the week ended on June 8th.
“While we acknowledge the uncertainty around tapering given the recent noise in data, we think that risks for USD … remain somewhat asymmetric and skewed to the upside, though the pace of appreciation will likely be somewhat contingent on near-term Fed rhetoric,” Morgan Stanley analysts said in a research report.
As of 9:00 GMT on Monday GBP/USD was edging down 0.19% to trade at 1.4084, while moving within a daily range of 1.4070-1.4119. The major currency pair has retreated 0.86% so far in June, following a 2.82% gain in May.
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 9.8 basis points (0.098%) as of 8:15 GMT on Monday, down from 10.9 basis points on June 11th.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 1.4131
R1 – 1.4166
R2 – 1.4221
R3 – 1.4256
R4 – 1.4292
S1 – 1.4076
S2 – 1.4041
S3 – 1.3986
S4 – 1.3931