GBP/USD rises towards 1.3950 but lacks continuation

The USD has seen some selling at the start of the European session on Friday. It has pushed the GBP/USD pair back above the 1.3950 level to fresh daily highs.

The US Treasury yields saw a modest pullback from a one-year high of 1,754% they hit the previous day. It has put some pressure on the US dollar. In turn, this has helped the GBP/USD pair to halt the previous day’s rejection drop from the critical psychological level of 1.4000. The pair regained traction on the last trading day of the week.

UK’s economic outlook remains uncertain

Meanwhile, calmer sentiment in the bond market has provided a modest boost to global risk sentiment. This has been seen as another factor affecting the safe-haven US dollar. That said, the optimistic US economic outlook should help limit the USD pullback. In addition, it will limit any significant rise in the GBP/USD pair.

Besides, the news about the likely shortage of vaccines for COVID-19 in the UK could prevent investors opening long positions aggressively around the British pound. A significant reduction in vaccine supply could derail the UK government’s plan to break out of the current lockdown and cloud prospects for a faster economic recovery.

This comes after Thursday’s rather pessimistic statement from the Bank of England. It indicated that the economy’s outlook remained unusually uncertain. Furthermore, repeated failed attempts at higher levels warrant caution before positioning itself for any further bullish movement amid the absence of relevant economic releases on Friday.

 

BoE kept its monetary policy unchanged

The BoE chose to keep its monetary policy unchanged. The central bank left its asset purchase program at £895 billion intact. Besides, it kept the interest rate at 0.10%.

Investors expected something sharper after the statements of Andrew Bailey, the governor of the entity. In an interview on British public radio, Bailey even stated that the increase in the bond yields in the secondary market was consistent with the economic outlook’s evolution. However, BoE’s later statements were much more prudent. The central bank only mentioned the increase in public debt yield due to the positive news regarding vaccines and a little stronger than anticipated improvement in global growth.

BoE’s statement has also coincided with a new rebound in the profitability of US bond yields. It is another reason for the US dollar’s advance on all fronts. Analysts doubt that it will cause the GBP/USD pair to penalize.