GBP/USD eases after Tuesday’s heavy pullback

by Jonathan Adams

The sterling dropped the biggest despite upbeat UK jobs report as the US dollar gained bids over Covid fears

GBP/USD eases from the day’s high to 1.3940 while searching for fresh direction, following Tuesday’s heavy pullback, amid Wednesday’s Asian session.

The sterling dropped the biggest, after refreshing the monthly top, despite upbeat UK jobs report as the US dollar gained bids over Covid fears.

The global Covid infections grew 12% on weekly basis, led by the jump in India’s new cases. As a result, the US decision to put over 80% of the globe under the “not to travel” list and the UK’s travel restrictions seem justified. The same virus woes push Japan towards recalling the emergencies once led in Tokyo and surrounding prefectures.

Elsewhere, the UK announced relief for the British truckers over Brexit norms on Tuesday. As per Reuters, “Britain on Tuesday eased controls designed to prevent a backlog of trucks in southern England caused by new post-Brexit paperwork, saying vehicles taking goods to the European Union would no longer need a special permit to enter the port region.”

Against this backdrop, S&P 500 Futures print mild losses while taking clues from the second day of downside by the Wall Street benchmarks. Additionally, the US 10-year Treasury yield keeps the previous day’s recovery moves but the US dollar awaits more clues to extend the bounce-off seven-week low, portrayed on Tuesday.

Although virus-led pessimism is likely to weigh on GBP/USD, the UK’s inflation figures for March will be the key to watch as the Bank of England (BOE) sounds bullish off-late. Forecasts suggest the headline Consumer Price Index (CPI) rise from 0.4% to 0.8% YoY.

Ahead of the data, TD Securities said, March inflation figures are released, and given the sharp downside surprise to last month’s figures, there’s elevated uncertainty about how quickly prices might rebound. We see mild downside risk to headline inflation at 0.7% y/y while core inflation registers 1.1% y/y.

This article is for information purposes only.
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