- GBP/USD continued scaling higher on Tuesday and shot to fresh 34-month tops.
- The impressive pace of COVID-19 vaccinations in the UK underpinned the sterling.
- The upbeat market mood weighed on the safe-haven USD and remained supportive.
The GBP/USD pair surrendered a major part of its intraday gains to 34-months and has now retreated to the lower end of its daily range, albeit has managed to hold above the 1.3900 mark.
A combination of supporting factors assisted the pair to gain some follow-through traction for the third consecutive session on Tuesday and prolong its recent bullish trajectory. The British pound continued to benefit from the Bank of England’s neutral policy stance, the continuous fall in new coronavirus cases and the impressive pace of vaccinations in the UK.
The British government reached the milestone of vaccinating 15 million of its most vulnerable people, or a quarter of its population on February 15. This would allow the UK Prime Minister Boris Johnson to lift restrictions sooner rather than later and get the economy moving. This, along with sustained US dollar selling bias, provided an additional boost to the GBP/USD pair.
The progress in COVID-19 vaccinations and expectations for a massive US fiscal spending plan has been fueling the optimism over a strong global economic recovery. This, in turn, continued boosting investors’ confidence, which was evident from the ongoing bullish run in the equity markets and undermined the USD’s relative safe-haven status against its British counterpart.
Meanwhile, the US bond market has been pricing in the likelihood for the passage of the US President Joe Biden’s proposed $1.9 trillion stimulus package. In fact, yields on the benchmark 10-year US government bond pushed through the 1.25% and jumped to the highest level since February 2020, though did little to ease the heavily offered tone surrounding the greenback.
That said, slightly overbought conditions on short-term charts held bullish traders from placing fresh bets and kept a lid on any further gains for the GBP/USD pair. Nevertheless, the near-term bias remains tilted in favour of bullish traders and supports prospects for a move towards reclaiming the key 1.4000 psychological mark amid absent relevant market-moving economic releases.
Technical levels to watch
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