Forex Market: GBP/USD off a three-week low as Pound speculators most bullish in three years, bond yield surge supports Dollar

Having touched a three-week trough on Friday due to a broadly stronger dollar, GBP/USD traded mostly stable above 1.3800 during the European session on Monday, as the latest CFTC futures data showed Pound speculators had been the most bullish in three years.

Against a basket of six major peers, the US Dollar continued to gain on Monday, while hitting a fresh 3 1/2-month high of 92.273, amid a broad surge in US bond yields and after the US Senate passed a $1.9 trillion coronavirus relief plan.

“Rising U.S. yields have added to equity market volatility and supported the US dollar,” UBS strategists wrote in an investor note.

“The Federal Reserve remains dovish, but chair Jerome Powell chose not to push back verbally against higher yields providing a further short-term boost to the greenback.”

Additional support came on the heels of upbeat US jobs data from last Friday. Employers across all sectors of the US economy, excluding the farming industry, added 379,000 jobs in February, well above market consensus of a 182,000 jobs growth, amid relaxed business restrictions, decelerating new COVID-19 infections, a fast vaccine roll-out and continued government support.

Meanwhile, the UK’s relative success in coronavirus vaccine roll-out has kept the Sterling underpinned against the Euro, as more than 21 million people in the country have already received their first dose of a COVID-19 vaccine.

Last week British Chancellor of the Exchequer Rishi Sunak announced a budget plan, which includes an additional extension of COVID-19-related stimulus packages as well as a corporate tax increase from 2023.

“Last week’s Budget supports our view that the UK economy is well-positioned for the coming recovery,” Goldman Sachs analysts wrote in a client note.

As of 10:01 GMT on Monday GBP/USD was inching up 0.02% to trade at 1.3833, while moving within a daily range of 1.3800-1.3866. Last Friday the major pair slipped as low as 1.3778, or its weakest level since February 12th (1.3776). The currency pair has retreated 0.67% so far in March, following a 1.71% gain in February.

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 4.6 basis points (0.046%) as of 9:15 GMT on Monday, down from 5.8 basis points on March 5th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3839
R1 – 1.3899
R2 – 1.3967
R3 – 1.4027
R4 – 1.4087

S1 – 1.3771
S2 – 1.3710
S3 – 1.3642
S4 – 1.3574