However, equity markets are slightly firmer at the start of the session. This is due to the fact that the dollar's early outperformance begins to fade during the European session. Trends across G10 currencies (Figure 1) show that they are neutral and not yet considered stretched. This leaves very little opportunity for countertrend play.

GBP/USD holds 1.38; UK Data Sensitivity Increases after Rate Talk

GBP/USD: The Pound's downturn is tempered by support at the 1.33800 handle. Rally levels are still limited to 1.3880-1.33900. Also important to keep an eye on EUR/GBP, which continues to hold 0.8520. This week was a big one for UK data. We are getting closer to the end of the furlough program's expiration, so we will be paying attention to the labor market report. Market sensitivity to UK data likely has increased following Bailey's statement last week, which indicated that there was disagreement in the committee regarding the conditions for a rate increase.

Support for AUD/USD drops

AUD/USD - As I stated last week, I am cautious about rallies in the AUD/USD. The psychological 0.7400 mark is a major stumbling block. Further resistance can be found at 0.7450. With risk sentiment stronger, the pair was once more held at 0.7440. The AUD might see some relief. The direction of travel is largely determined by risk appetite. The Aussie's outlook is not good, however, with the steady decline in iron ore price.