GBP/USD REMAINS DEFENSIVE BELOW 1.3850 ON STEADY USD

• GBP/USD remains muted on Monday in the early European session.
• US Dollar Index keeps upside momentum intact above 92.50.
• Brexit chaos, downbeat economic data outweigh hawkish BOE.

GBP/USD started the fresh trading week on a subdued note and remained pressured below 1.3850. The pair confides in a narrow trade band with no meaningful traction.

At the time of writing, GBP/USD is trading at 1.3838, down 0.01% for the day.

The US Dollar Index (DXY), which tracks the greenback performance against its six major rivals, stands strong above 92.50 with 0.08% gains despite a downtick in the US 10-year benchmark Treasury yields.

Investors remained pessimistic about the rising coronavirus cases and their impact on the economic recovery. This, in turn, helped the greenback to gain demand on its safe-haven appeal.

In the recent development, US House Democrats are expected to bring the higher corporate tax rates to 26.5% from 21% on wealthy individuals.

On the data front, the US Producer Price Index (PPI) jumped 0.7% in August, as compared to market expectations of 0.6%. The greenback found the footing on higher readings as it might propel the US central bank to start talking about tapering measures.

Philadelphia Federal Reserve President and CEO Patrick Harker said FOMC should start tapering soon, however declined to comment on the timing of the event.

On the other hand, the sterling managed to gain some ground following the optimism about the Bank of England (BOE) interest rate hike decision sooner than expected in the first half of 2022. The gains were short-lived on the Brexit worries and dismal economic data.

The European Union (EU) Brexit Chief Maros Sefcovic’s rejected the UK demand to rewrite the Northern Ireland (NI) trade rules. Thus stretching the tense condition between the UK and EU.

Furthermore, the UK’s latest GDP figures revealed that the domestic economic growth remained under pressure, with growth slowing to just 0.1% in July.

As for now, investors turn their attention to the US Consumer Inflation Expectations to trade fresh trading impetus.