GBP/USD retreats from daily high near 1.3750 as USD recovers

• GBP/USD consolidates gains on the last trading day of the week.
• US Dollar Index recovers part of its initial losses, trades above 93.00.
• BOE optimism fades away, Brexit woes keep sterling under pressure. 

The GBP/USD pair flattened on Friday in the Asian trading hours following a sharp rally in the previous session. Led by optimism of the Bank of England’s (BOE) surprised hawkish stance, the pair jumped more than 130-pips off the monthly lows near 1.3600 on super Thursday. GBP/USD opened lower albeit recovered swiftly to touch the intraday high of 1.3736 but failed to preserve the momentum.

 At the time of writing, the GBP/USD pair is trading at 1.3722, up 0.04% on the day.

The US Dollar Index (DXY) trades, which tracks the performance of the greenback against its six major rivals, turns positive after the early losses on Friday. Investors digested the FOMC policy update but remained pessimistic about the renewed concern of debt payment plans by China’s property giant Evergrande.

The US benchmark 10-year Treasury yields rose by 7.8 basis points following the US Federal Reserve mandate on timeline and the pace of tapering in its September policy meeting. The US Fed could start tapering as soon as November and end in 2022 but also remained vigilant if more stimulus was required in the economy.

On the other hand, the British pound gained traction against USD and Euro following the Bank of England (BOE) monetary policy announcement on Thursday, where it kept its interest  rate unchanged at 0.75% but warned  of higher inflation rate. Dave Ramsden and Michael Saunderes, two of the Monetary Policy Committee (MPC) members voted for an early end to pandemic-era stimulus.

Meanwhile, the British Finance Minister Rishi Sunak had ordered two immediate reviews of the country’s financial regulation in concert with the collapse of supply chain finance firm Greensill Capital. The UK parliamentary committee issued a report in July related to Greensill’s collapse. This, in turn, weighs negatively on the performance of the British pound.

In addition to that, the UK Prime Minister Boris Johnson concedes that a post-Brexit deal with the US is not happening any time in the near future.

As for now, traders keep their focus on the release of the UK CBI Distributive Trades, US Fed official’s speeches, and New Home Sales data to gain some fresh trading impetus.

GBP/USD additional levels