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  • GBP/USD gained traction for the second consecutive session on Wednesday.
  • The risk-on mood undermined the safe-haven USD and remained supportive.
  • Upbeat UK CPI figures for December did little to provide any meaningful boost.

The GBP/USD pair maintained its bid tone near weekly tops, around the 1.3665 region and had a rather muted reaction to the UK macro data.

The pair built on this week’s solid rebound from the 1.3520 region and gained traction for the second consecutive session on Wednesday amid a softer tone surrounding the US dollar. The market bets for additional US fiscal stimulus increased further following the US Treasury Secretary nominee Janet Yellen’s confirmation hearing before the Senate Finance Committee on Tuesday.

Yellen urged lawmakers to act big on COVID-19 relief package and not worry too much about debt. This comes on the back of the optimism over the rollout of vaccines for the highly contagious coronavirus disease and remained supportive of the underlying bullish sentiment. This, in turn, was seen as one of the key factors that undermined the greenback’s relative safe-haven status.

On the other hand, the GBP bulls seemed rather unaffected by the imposition of fresh travel restrictions in the UK, instead took cues from hotter-than-expected UK consumer inflation figures. In fact, the headline CPI rose more-than-anticipated and came in at 0.6% YoY rate in December. Adding to this, the core CPI (excluding food and energy items) also surpassed consensus estimates.

That said, investors now seemed to have turned cautious ahead of President-elect Joe Biden’s inaugural ceremony later this Wednesday. This, along with a modest uptick in the US Treasury bond yields, amid expectations of a larger government borrowing, extended some support to the USD and kept a lid on any further gains for the GBP/USD pair, at least for the time being.

Investors on Wednesday will also take cues from a scheduled speech by the Bank of England Governor Andrew Bailey’s speech amid absence relevant market moving economic releases from the US.

Technical levels to watch