- GBP / USD gained strong positive traction on Friday amid a widespread USD selloff.
- GBP bulls largely ignored Brexit concerns, BoE Governor Bailey said.
- A sustained return above the 1.3300 mark is needed to confirm any further appreciation.
GBP / USD hit new highs since the start of the year, around the 1.3320 region at the start of the North American session, but quickly fell a few pips afterward.
After yesterday’s volatile swings and a brief consolidation at the start of the trading action on Friday, the pair caught some new bids and finally broke out of a nearly two week old trading range. The US dollar remained under strong selling pressure following accommodative signals from the Fed, which in turn were seen as one of the key factors in the GBP / USD pair’s rise.
Fed Chairman Jerome Powell, during his opening address at the Jackson Hole Symposium, said on Thursday that the Fed was prepared to tolerate inflation exceeding the 2% target for a period of time in order to compensate years of under-exceeding. The comments raised speculation that the Fed will increase its monetary stimulus and keep rates lower to support the economic recovery from the pandemic.
In addition to widespread USD weakness, the possibility that some short-term trading stops could be triggered by a sustained return above the 1.3240-50 region further contributed to the strong positive move in the GBP / USD pair. . Rather, GBP bulls seemed unaffected by concerns about the lack of progress in Brexit negotiations and also ignored accommodating comments from BoE Governor Andrew Bailey in the past hour.
Bailey said the UK central bank has more ammunition to prop up the economy against its coronavirus shock. Bailey also supported the possibility of negative interest rates, but failed to impress bearish traders or cause a significant sell-off around GBP / USD. Nonetheless, the bulls could now wait for a sustained return above the 1.3300 round-digit mark before placing further bets.