07.07.202123:00 Forex Analysis & Reviews: GBP/USD: Sell the pair on rallies

The pound is still "stable in its volatility." This fact allows traders of the GBP/USD pair to enter short positions at the peak of corrective pullbacks without unnecessary worries. Over the past week and a half, the pair only rose once to the borders of the 39th figure - in all other cases, the upward momentum faded at the 38th price level. The British currency is under pressure from several fundamental factors: the Bank of England maintains a dovish position (ignoring the rise in inflation), the Delta strain continues to conquer the world (including the UK), and macroeconomic reports do not always please GBP/USD bulls. As a result, the pair is under stable background pressure, maintaining its vulnerability to dollar bulls.

And in the near future, this pressure may significantly increase - especially if today's minutes of the Federal Reserve comes out in favor of the greenback, and Friday's data on the growth of the British economy does not turn out to be in favor of the pound.

So, May data on the UK's GDP growth will be published on Friday. And although these indicators are "lagging", they will in any case have a tangible impact on the GBP/USD pair. According to preliminary forecasts, in May, the British economy will slow down its growth for the first time in three months. The economy increased by 0.7% in February, by 2.1% in March, and by 2.3% in April. The May indicator should reach 1.9%. Industrial production can also demonstrate a negative trend, the volume of which, according to forecasts, will decrease by one and a half percent. According to analysts, a similar situation has developed in the processing industry.

If the aforementioned indicators come out at the forecast level (or even more so in the red zone, the pound will again be under pressure, since this circumstance will strengthen the BoE's dovish position. Let me remind you that in early July, BoE Governor Andrew Bailey once again reminded traders that the central bank is not going to curtail QE and raise the interest rate in the foreseeable future. And this is despite the fact that British inflation exceeded the central bank's target in May, reaching 2.1% (in annual terms). On a monthly basis, the indicator also exceeded the forecast values, reaching the level of 0.6%. But Bailey "brushed off" this release, saying that the inflationary growth is temporary and is due to the low base of last year. If Friday's macroeconomic releases disappoint in addition to this, then there is no doubt that all subsequent comments by Bailey and his colleagues will not be in favor of the British currency.

The dollar, in turn, "rests on its laurels", taking advantage of the increased demand from traders. Moreover, this demand is due not only to the hawkish intentions of the Federal Reserve. Please note that the greenback continues to gradually strengthen its positions against the backdrop of declining Treasury yields. In particular, the yield on 10-year bonds collapsed yesterday to multi-month lows in response to the decline in the ISM index. Whereas the dollar, which for many months showed a correlation with Treasury yields, went its own way and actually ignored the report. Perhaps this is due to the fact that the dollar is in high demand as a defensive asset against the backdrop of rising anti-risk sentiment in the foreign exchange market. First of all, this is due to the spread of a dangerous strain of the coronavirus known as "Delta", as well as an even more dangerous and infectious one - "Delta+". As the experience of Israel has shown, new cases of infection are recorded among vaccinated people. Moreover, according to a report by the Israeli Ministry of Health, the Pfizer vaccine was less effective in the context of protection against the "classic" type of coronavirus and new strains (but at the same time the drug provides protection against severe disease).

Probably, it is for this reason that the safe dollar is now in high demand - World Health Organization experts and many European, British experts are increasingly talking about the fact that we are (primarily the countries of Asia and the European continent) on the verge of another wave of a pandemic that will sweep the world at the end summer - early autumn. Partly thanks to such sad prospects, the dollar as a protective instrument at the moment is retaining its positions.

But above all, the greenback owes its position to the Fed, whose representatives voice more hawkish rhetoric compared to the representatives of the BoE or the European Central Bank. That is why the minutes of the July Fed meeting, which will be published today at 19:00 (London time), can significantly strengthen the position of the greenback. If the document reflects more or less clear time benchmarks regarding the collapse of QE, the GBP/USD pair may retest the local lows (1.3730), heading towards the base of the 37th figure. If the minutes of the Fed disappoint the dollar bulls, the pair may go to a correction - which is also advisable to use to open short positions.