Resistance in the Face of a Fall
The prominent GBP/USD currency pair was swift in reversing a dip it fell into in the early European session on Monday as a new week began. The initial dip took the currency pair down to the year-to-date low point and got to trade close to the higher end of the range it got on a daily encounter in the vicinity of 1.3025 to 1.3030 zones.
At a point, the pair displayed a level of resistance under the 1.3000 psychological benchmarks, and it was able to draw some purchases for the dip on Monday, although there were not sufficient follow-up sales to backup the recovery.
GBP/USD price chart. Source TradingView
The lead of incumbent President Emmanuel Macron in the preliminary round of the French election gave a significant measure of support to the Euro. The US dollar was, as a result, forced into a consolidation of its latest gains to reach the highest point for it since last May, and that had a ripple effect by serving as a tailwind to the GBP/USD currency pair.
The Confidence of Investors
With that on the table, it was a confluence of several factors that helped to reduce significant US dollar corrective falls and helped to put a firm lid on all the meaningful gains for the prices of spot, even if it is just for now.
There now seems to be so much conviction on the part of investors that the Federal Reserve would go ahead to tighten its monetary policy at a much more rapid rate in order for it to effectively fight the obstinately rising inflation rates. The market had earlier priced in high percentages that the Federal Reserve would increase the interest by 50 basis points at its next policy meeting in May and also another 50 basis points at the next meeting after. That makes speculation of 100 basis points increase in interest rates in a relatively short space of time.
Much more, there are concerns that the continuous rise in the price of commodities would add significant upward pressure to the very high consumer inflation rates. This worry pumped the American Treasury bonds yield up to a new peak it had not been in many years, and it served at underpinning the buck.
The focus of the market will now be on the consumer inflation numbers in the United States, which are scheduled to be released on Tuesday. While at that, the yield of the American bond continues to play a significant role in influencing the US dollar and its price dynamics.
