GBP/USD: Pendulum swings against the dollar but insufficient for a rally

GBP/USD has been bouncing as the greenback dropped after US bond yields dropped following the bond auction but the dollar’s weakness looks insufficient to break the downtrend resistance. What’s more, concerns about the British economy remain prevalent and may weigh on the pound, FXStreet’s analyst Yohay Elam inform.

Key quotes

“The greenback gained ground after the US completed a massive auction worth $38 billion. Yields advanced before the offering, carrying the dollar higher with it, and then dropped, resuming the medium-term trend.”

“Other factors weighing on the world's reserve currency include America's persistently high coronavirus statistics, the ongoing impasse in Washington over the next fiscal relief package, and uncertainty over the economy's performance. Weekly jobless claims will provide first figures for the current month and carry cautiously optimistic expectations.”

“The dollar pendulum could swing back up. China and the US will hold officials talks to take stock of the trade deal – and Beijing is already hinting it has a long list of grievances and that it could move away from the deal.” 

“Cable's impediments mostly come from the British side. The economy shrank by 20.4% in the second quarter – better than expected but a devastating figure. More importantly, the government is preparing the public for a surge in unemployment. Rishi Sunak, Chancellor of the Exchequer, has been reiterating that the successful furlough scheme is unsustainable and stated that ‘many people will lose their jobs’.”