GBP/USD slides further below mid-1.3800s, one-week lows
- A combination of factors prompted some fresh selling around GBP/USD on Tuesday.
- Dovish BoE, COVID-19 jitters continued acting as a headwind for the British pound.
- A modest pickup in the USD demand further contributed to the intraday selling bias.
The GBP/USD pair continued losing ground through the first half of the European session and dropped to one-week lows, around the 1.3840-35 region in the last hour.
The GBP/USD pair came under some renewed selling pressure on Tuesday and extended its recent rejection slide from the key 1.4000 psychological mark. This marked the third day of a negative move in the previous four and was sponsored by a combination of factors.
Against the backdrop of last week's dovish Bank of England, worries about the spread of the more contagious Delta variant of the coronavirus acted as a headwind for the British pound. On Monday, the UK reported the largest one-day increase in new cases since January 30.
This, to a larger extent, negated the optimism that the UK remains on track to end remaining curbs on social contact in July. In fact, the new British health minister Sajid Javid reaffirmed on Monday that coronavirus-related restrictions would be lifted on July 19.
Apart from this, a modest pickup in the US dollar demand exerted additional downward pressure on the GBP/USD pair. The USD was supported by growing marked speculations that the Fed will tighten its monetary policy earlier if price pressures continue to intensify.
The intraday USD strength was further fueled by an uptick in the US Treasury bond yields. Adding to this, the prevalent cautious mood around the equity markets further undermined the safe-haven USD and dragged the GBP/USD pair further below the 1.3850 support zone.
Market participants now look forward to the release of the Conference Board's US Consumer Confidence Index. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair.
Technical levels to watch