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  • GBP/USD regained positive traction on Tuesday and recovered a part of overnight losses.
  • The prevalent risk-on mood undermined the safe-haven USD and remained supportive.

The GBP/USD pair added to its intraday gains and climbed further beyond the key 1.3500 psychological mark during the early part of the European session.

Following the previous session’s sharp intraday pullback of around 150 pips, the pair caught some fresh bids on Tuesday and was being supported by the emergence of some fresh US dollar selling. The already upbeat market mood got an additional boost after the lawmakers pushed forward with an enhanced COVID-19 relief package.

In fact, the House of Representatives voted on Monday to increase stimulus payments to qualified Americans to $2,000 from $600 and sent the measure to the Senate for a vote. The prevalent risk-on environment was seen as a key factor that undermined the safe-haven greenback and provided a goodish lift to the GBP/USD pair.

Meanwhile, the euphoria over Brexit agreement before the end of transition period seemed to have faded amid concerns about the non-inclusion of the crucial services sector in the accord. Nothing has been agreed on financial markets, which could be a big negative for the UK and in turn, weigh on the British pound.

This, coupled with worries about the discovery of a new faster-spreading variant of coronavirus and the imposition of lockdowns/travel restrictions in the UK, might cap gains for the GBP/USD pair. Moreover, investors might also be reluctant to place aggressive bets amid thin trading conditions and absent fundamental catalyst.

Technical levels to watch