GBP/USD climbs to fresh session tops, 1.3800 mark back in sight

GBP/USD attracted some buying on Thursday amid a modest USD pullback.
Hawkish Fed expectations, the risk-off impulse might help limit USD losses.
Any further recovery move could attract sellers and fizzle out rather quickly.
The GBP/USD pair recovered around 25-30 pips and shot to fresh daily tops, near the 1.3780 region during the early European session.

The pair attracted some dip-buying near mid-1.3700s on Thursday and recovered further from two-week lows, around the 1.3725 region touched in the previous session. A modest US dollar pullback prompted some short-covering move and assisted the GBP/USD pair to snap three consecutive days of the losing streak.

The risk-off impulse in the markets dragged the US Treasury bond yields lower and turned out to be a key factor that exerted some pressure on the greenback. That said, expectations for an imminent Fed taper announcement in 2021 might continue to act as a tailwind for the USD and cap the upside for the GBP/USD pair.
Data released by the US Bureau of Labor Statistics on Wednesday showed that the number of job openings reached a new record high in July. The report also revealed a steady increase in the number of workers voluntarily quitting their jobs, a sign of confidence in the labour market. This, in turn, suggested that a sharp slowdown in hiring in August was due to employers being unable to find workers rather than weak demand for labour.

This, along with hawkish comments by several FOMC members, reinforced market speculations that the Fed will begin rolling back its massive pandemic-era stimulus sooner rather than later. Apart from this, worries about slowing global economic growth – amid the fast-spreading Delta variant – should help limit losses for the safe-haven USD.

Hence, any subsequent move runs the risk of fizzling out rather quickly amid absent relevant market moving economic releases from the UK. This makes it prudent to wait for some strong follow-through buying before confirming that the GBP/USD pair has bottomed out in the near term and positioning for any further appreciating move.