Forex Market: GBP/USD rebounds from one-month lows as it tracks stock market rally

GBP/USD rebounded from last week’s one-month trough on Monday, while tracking other risk-sensitive assets, as investor risk sentiment improved while the safe-harbor greenback came off recent highs.

The US Dollar eased from an over 9-month peak against a basket of six major peers on Monday, as market sentiment improved with a rebound in Asian shares despite the spreading Delta variant of the novel coronavirus. Prices of base metals rose on hopes of improving demand after China reported no new locally transmitted COVID-19 cases for the first time since July.

The safe-haven dollar has remained firm in August due to concerns that the fast-spreading Delta variant could disrupt global economic recovery, while the Federal Reserve is signaling a possible stimulus tapering as soon as this year.

Market players will be expecting the annual Jackson Hole symposium, which will be held in an online format on August 27th because of COVID-19 considerations. Investors will closely watch a speech by Fed Chair Jerome Powell on the economic outlook during the event, as they will look for more clues over the timing and pace of the central bank’s policy tightening.

“I’m thinking the Fed could sound somewhat hawkish at the Jackson Hole symposium this week, so for now the firmness in the U.S. dollar could continue,” Osamu Takashima, head of G10 FX strategy at Citigroup Global Markets Japan, was quoted as saying by Reuters.

As of 8:47 GMT on Monday GBP/USD was edging up 0.26% to trade at 1.3656, while moving within a daily range of 1.3607-1.3662. Last week the Forex pair slipped as low as 1.3602, which has been its weakest level since July 21st (1.3591). The major currency pair has retreated 1.78% 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 11.28 basis points (0.1128%) as of 8:15 GMT on Monday, down from 13.2 basis points on August 20th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 1.3621
R1 – 1.3640
R2 – 1.3660
R3 – 1.3679
R4 – 1.3698

S1 – 1.3601
S2 – 1.3582
S3 – 1.3562
S4 – 1.3543