The GBP/USD pair bounced off the 1.3500 support yesterday, after a three-day bearish tone. A stronger US Treasury yield extended some support to the US dollar, which exerted bearish pressure on the cable.
Also, the escalating Brexit worries ahead of talks between UK Foreign Secretary Liz Truss and European Commission Vice President Maros Sefcovic this Friday added to the bearish tone around the British pound.
The US 10-year Treasury yield recently climbed by 0.30% and hit its two-year high around 1.95%, while the five-year Treasury yield jumped by a higher 0.40% to refresh its 18-month top at 1.8050%. Additionally, the dollar index (DXY) gained 0.23 this morning and trades at 95.62.
Meanwhile, expectations of a hawkish US Fed outlook at its March FOMC meeting along with the geopolitical tensions around the Russia-Ukraine standoff and the Sino-American trade tussles have extended additional support to the US bond yields.
However, the lingering market indecisiveness ahead of the US CPI data released on Thursday and mild upbeat sentiment around COVID-19 conditions continue to challenge US bond sellers.
In other news, media company Politico revealed that political tensions in Northern Ireland (NI), due to Brexit, have been exacerbated. The media house quoted the UK region’s Agriculture Minister Edwin Poots, who recently stated: “The Democratic Unionist Party (DUP) won’t allow Northern Ireland’s power-sharing government to be revived unless the European Union abandons its requirement for checks on British goods arriving here.”
GBP/USD Traders to Focus on the UK and US Economic Docket This Week
Also, British Science Minister George Freeman recently admitted the lack of progress in talks over EU funding as NI and fishing issues take up all the Brexit discussions.
Regardless, the GBP/USD pair could record additional weakness in the coming days, given a potentially stronger USD on the back of positive US Treasury yields. Additionally, the focus will shift to Brexit talks, UK Q4 2021 GDP, and the US CPI, all scheduled for release later this week.
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