GBP/USD sub-1.4000 amid the US benchamerk yields rising

• Higher US treasury yields send the US dollar higher.
• The GBP/USD weak sentiment from last week rolls over into Monday.

The GBP/USD is trading at around 1.3959 down 0.31% on Monday as the US treasury yields are at levels not seen since 2014.

The cable is under pressure as last week important macroeconomic data from the UK as well as comments from Bank of England officials lowered investors’ expectations of a rate hike in May.

On the other hand, the US Dollar is on the front foot as the US Treasury yields are in a strong uptrend and flirted on Monday with the 3.00% psychological mark. The Federal Reserve Bank is expected to hike three times this year which is supporting the the US dollar. Additionally, last week saw a plethora of Fed speeches with some officials inclusing New York Fed President William Dudley making upbeat comments on the US economy. 

The salient event of the week for Sterling will be the release of the first quarter Gross Domestic Product (GDP) on Friday which is expected to increase 0.4% quarterly and advancing 1.4% on an annual basis. For the USD the key data will be the Personal Consumption Expenditure price index and the (PCE) and the first quarter GDP scheduled for Friday. It is the favorite gauge of inflation of the Federal Reserve Bank, therefore, a strong reading will reinforce rate hike expectations. The US GDP is slated for the same day. The first quarter US GDP is seen increasing 2.3% on a quarterly annualized basis.

Coming up next in the North American session, the Markit's  manufacturing Purchasing Managers Index (PMI) preliminary dataset for April is scheduled at 13:45 GMT while the Existing Home Sales data is slated at 14:00 GMT. However, the focus is on the rising US treasury yields and should overshadow the US data.  

Looking back last week’s UK wage growth, retail sales and inflation data all disappointed and what further prompted investors to get rid of the British pound were the comments of Mark Carney, Bank of England Governor. He said that the rate hike might be delayed due to the uncertainties related to the Brexit, which sent the pair 160 pips lower last Thursday. Adding to the bearish pressure was Michael Saunders, who represents the hawkish side of the Monetary Policy Committe of the Bank of England, who made rather dovish comments last Friday saying: “the UK rates probably need to move over time to something more neutral, but not too quickly.”

GBP/USD daily chart

The short-term trend is bearish. Resistances are seen at the psychological levels 1.4000, 1.4100 and 1.4200. Supports are priced in at 1.3965 and at 1.3711 swing lows.