- GBP/USD edged higher on Wednesday and built on the overnight bounce from two-week lows.
- A modest USD pullback, amid improving global risk sentiment, seemed to extend some support.
- Concerns over the economic fallout from the coronavirus pandemic might cap any further gains.
The GBP/USD pair edged higher through the early European session and refreshed daily tops, around the 1.2345 region in the last hour.
Following a brief consolidation through the early part of Wednesday’s trading action, the pair managed to gain some positive traction and built on the overnight late rebound from mid-1.2200s or two-week lows.
The pair snapped two consecutive days of losing streak and the uptick was sponsored by a modest pullback in the US dollar, which was being weighed down by a slight improvement in the global risk sentiment.
The risk-on mood was supported by the US President Donald Trump’s comments that 20 states have shown readiness to re-open and the passage of $484 billion economic stimulus package by the US Senate.
The British pound got an additional boost from Wednesday’s mostly in line UK consumer inflation figures, which showed that the headline CPI eased to 1.5% YoY in March from the previous month’s 1.7%.
However, the ever-increasing coronavirus cases and related death, coupled with increasing prospects of an extended lockdown in the UK might continue to take its toll on the sterling and kept a lid on any further gains.
This comes amid persistent worries over the economic fallout from the coronavirus pandemic and expectations that the world economy will remain weak for some time, even once the lockdowns are eased.
The market concerns should continue to support the greenback’s status as the global reserve currency, which might further contribute towards capping the upside for the major, at least for the time being.
Hence, it will be prudent to wait for some follow-through buying before confirming that the pair might have stalled its recent rejection slide from 200-day SMA and positioning for any further appreciating move.
In the absence of any major market-moving economic releases from the US, developments surrounding the coronavirus saga might continue to play a key role in influencing the pair’s momentum on Wednesday.
Technical levels to watch