GBP/USD remains depressed near daily lows, holds above mid-1.3600s
- Indications of an extended lockdown in the UK prompted some selling around GBP/USD.
- Disappointing releases of UK Retail Sales and PMIs further undermined the British pound.
- A pullback in the equity markets benefitted the safe-haven USD and added to the selling bias.
The GBP/USD pair maintained its heavily offered tone through the mid-European session, albeit has managed to hold its neck above mid-1.3600s.
The pair witnessed some heavy selling on the last trading day of the week, snapping three consecutive days of the winning streak, and erased the previous day's positive move to fresh 32-month tops. The British pound was weighed down by the possibility of an extended coronavirus-induced lockdown in Britain. In fact, the UK Prime Minister Boris Johnson said that it was "too early" to say whether England's Covid restrictions will be lifted by spring.
The intraday selling bias surrounding the sterling picked up pace in reaction to downbeat UK Retail Sales figures for December. The bearish pressure remained unabated following the release of worse-than-anticipated flash UK PMI prints. This further added to worries about the UK economic growth at the start of 2021 and affected the GBP negatively.
Apart from this, a turnaround in the global risk sentiment benefitted the US dollar's relative safe-haven status. This was seen as another factor that further contributed to the GBP/USD pair's intraday downfall. That said, retreating US Treasury bond yields held the USD bulls from placing aggressive bets and helped limit any further losses for the major.
This makes it prudent to wait for some strong follow-through selling before confirming that the GBP/USD pair has topped out in the near-term and positioning for any meaningful corrective slide. Nevertheless, the pair still seems poised to end the week with gains of around 0.6% as market participants look forward to the US PMI prints for a fresh impetus.
Technical levels to watch