GBP/USD traded within a relatively tight range on Monday, while hovering just above lows unseen in 1 1/2 weeks, as market players were weighing up the possibility of an earlier asset purchase tapering by the Federal Reserve.
The major pair retreated over 0.4% on Friday on the back of a stronger-than-anticipated US Non-Farm Payrolls report. Employers in all sectors of US economy, except the farming industry, added 943,000 new jobs in July compared with a median analyst estimate of 870,000. May and June payrolls have also been revised up.
The yield on US 10-year government bonds surged 8 basis points on Friday to a two-week peak of 1.3053%.
“The strong U.S. report appears to clear the last hurdle for the Fed’s tapering,” Mizuho Bank strategist Ken Cheung wrote in a research note, cited by Reuters.
According to Cheung, market players have pushed forward the central bank’s tapering announcement to as early as the Jackson Hole symposium later in August.
Fed Vice Chair Richard Clarida indicated last week that conditions for an interest rate hike might be met as soon as late 2022.
Next, investors will be paying close attention to the US consumer inflation numbers due out on Wednesday.
As of 12:37 GMT on Monday GBP/USD was edging up 0.10% to trade at 1.3878, after earlier touching an intraday low at 1.3850. The latter has been the pair’s weakest level since July 28th (1.3842). The major currency pair has retreated 0.17% so far in August, following a 0.55% gain in July.
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 9.04 basis points (0.0904%) as of 12:15 GMT on Monday, up from 8.0 basis points on August 6th.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 1.3887
R1 – 1.3912
R2 – 1.3958
R3 – 1.3983
R4 – 1.4009
S1 – 1.3840
S2 – 1.3815
S3 – 1.3768
S4 – 1.3722