Forex Market: GBP/USD rebounds from an 11-week low, dollar takes a breather ahead of Fed Minutes

GBP/USD extended a rebound from 11-week lows on Monday, as the US Dollar paused recent rally, while Britain was approaching the end of major COVID-19 lockdown restrictions.

Health Secretary Sajid Javid has said that there was no reason for restrictive measures to remain in place beyond July 19th in England, while all major legal pandemic-related restrictions in Scotland are set to be lifted by August 9th.

The final stage for lifting lockdown was delayed by four weeks from June 21st due to the spread of the Delta variant of the novel coronavirus, while the government required more time to inoculate the adult population.

Meanwhile, the US Dollar pulled back from a three-month high against a basket of six major peers and was mostly flat on Monday, after last Friday’s mixed US labor data eased investor concerns over a sooner-than-expected end to the Fed’s monetary stimulus.

June’s job growth exceeded market expectations, but the rate of unemployment ticked up, which suggested the US central bank could afford to wait before scaling back asset purchases or raising interest rates.

“The report was mixed enough to probably keep the Fed from announcing tapering soon,” Westpac analyst Imre Speizer was quoted as saying by Reuters.

“I think the market was thinking you’d get a signal at (the)Jackson Hole (meeting) in August. This report says that that just might be a bit early.”

This week’s focus will be on the Reserve Bank of Australia’s policy decision on Tuesday as well as on the minutes from Federal Reserve’s June meeting, due out on Wednesday.

“More information on when the FOMC could taper its asset purchases can boost U.S. interest rates and the dollar,” Joe Capurso, an analyst at Commonwealth Bank of Australia, said.

“So can further evidence that the FOMC’s outlook for inflation is shifting. In particular, analysts will look for signs that the FOMC is less confident the spike in inflation will be transitory. Or that the FOMC’s tolerance for an inflation overshoot is waning.”

Markets in the US are to remain closed on Monday due to the Independence Day holiday.

As of 8:35 GMT on Monday GBP/USD was edging up 0.20% to trade at 1.3852, while moving within a daily range of 1.3817-1.3856. Last Friday the pair slipped as low as 1.3731, which has been its weakest level since April 16th (1.3716). The major currency pair has gained 0.16% so far in July, following a 2.66% drop in June.

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 17.66 basis points (0.1766%) as of 8:15 GMT on Monday, down from 19.0 basis points on July 2nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3800
R1 – 1.3869
R2 – 1.3913
R3 – 1.3982
R4 – 1.4051

S1 – 1.3756
S2 – 1.3687
S3 – 1.3642
S4 – 1.3598