GBP/USD holds steady near multi-week tops post-UK PMI, awaits NFP report
- GBP/USD extended its sideways consolidative price action through the early European session.
- Dovish Fed expectations, the risk-on mood undermined the USD and extended some support.
- Investors now seemed reluctant to place fresh bets ahead of the US monthly jobs report (NFP).
The GBP/USD pair consolidated its recent gains to three-week tops and remained confined in a narrow trading band below mid-1.3800s through the early European session.
The pair struggled to capitalize on the previous day's breakout momentum beyond the 1.3800 mark and witnessed a subdued/range-bound price action during the first half of the trading action on Friday. The US dollar languished near one-month lows amid expectations for a possible delay in the Fed's plan to roll back its pandemic-era stimulus.
The risks associated with the fast-spreading Delta variant of the coronavirus now seemed to have forced investors to push back the likely timing for an imminent taper announcement. This comes on the back of Fed Chair Jerome Powell's dovish remarks last Friday, saying that the US central bank was in no hurry to raise interest rates.
Apart from this, the prevalent risk-on environment further undermined the greenback's relative safe-haven status and acted as a tailwind for the GBP/USD pair. That said, the recent spike in new COVID-19 cases in the UK and a slight downward revision of the UK Services PMI held bulls from placing aggressive bets around the sterling.
Moreover, the UK and EU remain at odds on the way forward for the Northern Ireland Protocol of the Brexit agreement. This warrants some caution before positioning for any further appreciating move as investors wait for a fresh catalyst from the US monthly jobs data, scheduled for release later during the early North American session.
The closely-watched NFP report will be looked upon for fresh clues about the likely timing of when the Fed will begin tapering its massive bond purchases. This will play a key role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the GBP/USD pair.
Technical levels to watch