- GBP/USD attracted some dip-buying on Wednesday and snapped two days of losing streak.
- An upward revision of the UK Q4 GDP print extended some support to the British pound.
- A modest USD pullback from multi-month tops provided an additional boost to the major.
The intraday USD selling bias picked up pace during the early European session and pushed the GBP/USD pair to daily tops, around the 1.3790 region in the last hour.
A combination of factors assisted the pair to regain some positive traction on Wednesday and built on the previous day’s modest bounce from the 1.3700 neighbourhood. The British pound found some support following the release of better-than-expected UK macro data.
The UK Office for National Statistics reported that the economy expanded by 1.3% in the fourth quarter of 2020. This was slightly higher than the 1.0% growth estimated previously and helped offset the widening UK current account deficit, which almost doubled to £26.3 billion.
On the other hand, the US dollar witnessed some profit-taking from four-month tops. This was seen as another factor that provided an additional lift to the GBP/USD pair. That said, the upbeat US economic outlook should limit the USD pullback and cap gains for the major.
Investors remained optimistic about the outlook for the US economy amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan. The White House outlined details of Biden’s $2.25 trillion infrastructure plan earlier this Wednesday.
Meanwhile, the reflation has been fueling expectations for an uptick in US inflation and raised doubts that the Fed will retain ultra-low interest rates. This was evident from the recent runup in the US Treasury bond yields, which might further underpin the greenback.
Hence, it will be prudent to wait for some follow-through buying beyond the 1.3800 mark before traders start positioning for the resumption of the recent bounce from multi-week lows. Nevertheless, the GBP/USD pair, for now, seems to have snapped two days of the losing streak.
Market participants now look forward to the US economic docket, featuring the release of the ADP report, Chicago PMI and Pending Home Sales. Apart from this, Biden’s speech at 20:20GMT will influence the USD price dynamics and provide a fresh impetus to the GBP/USD pair.
Technical levels to watch
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