GBP/USD clings to strong intraday gains, 1.4100 mark remains in sight
- GBP/USD gained strong follow-through traction for the second straight session on Monday.
- The Scottish election outlook provided some relief to the GBP and remained supportive.
- A modest USD rebound – amid an uptick in the US bond yields – did little to hinder the move.
The GBP/USD pair shot to more than two-month tops during the first half of the European session, with bulls now eyeing a move towards reclaiming the 1.4100 round-figure mark.
The pair built on the previous session's post-NFP positive move and gained some strong follow-through traction on the first day of a new trading week. This marked the second consecutive session of solid gains and was exclusively sponsored by the outcome of the Scottish Parliament election.
Sturgeon’s Scottish National Party (SNP) recorded its fourth consecutive victory and won on 64 seats. This, however, was one short of an outright majority and helped ease the UK political risks, which, in turn, seemed to have prompted some aggressive short-covering around the British pound.
Apart from this, the possibilities of some trading stops being triggered on a sustained move beyond the key 1.4000 psychological mark further contributed to the momentum. Bulls seemed rather unaffected and largely shrugged off a modest US dollar rebound from more than two months.
The greenback found some support from a goodish pickup in the US Treasury bond yields, though lacked bullish conviction amid dovish Fed expectations. Friday's disappointing US monthly jobs report reaffirmed that the Fed will keep interest rates low for a longer period.
In fact, the headline NFP showed that the economy added only 266K new jobs in April. This was well below consensus estimates pointing to a reading of nearly one million. Adding to this, the unemployment rate unexpectedly edged higher to 6.1% from 6.0% in March.
There isn't any major market moving economic data due for release on Monday, either from the UK or the US. Hence, market participants will now look forward to the UK Prime Minister Boris Johnson's statement on further reopening of the UK economy for some meaningful trading opportunities.
Technical levels to watch