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  • GBP/USD gained strong follow-through traction on Wednesday amid sustained USD selling.
  • The prevalent upbeat market mood was seen as a key factor undermining the safe-haven USD.
  • Even a modest uptick in the US bond yields did little to provide any respite to the USD bulls.

The GBP/USD pair caught some fresh bids during the early European session and climbed to mid-1.3800, or the highest level since April 2018 in the last hour.

Following a brief consolidation through the first half of the trading action on Wednesday, the pair regained traction and built on the post-BoE solid bounce from mid-1.3400s. It is worth recalling that the UK central bank pushed back expectations for negative interest rates and provided a strong lift to the British pound.

The sterling further benefitted from its lead in terms of the coronavirus vaccination drive, which, along with the emergence of some fresh selling around the US dollar, provided an additional boost. This, in turn, assisted the GBP/USD pair to capitalize on the overnight breakout momentum through the 1.3755-60 congestion zone.

The recent USD recovery from multi-year lows ran out of the steam following the release of US monthly jobs report, which raised doubts about a relatively faster US economic recovery. Apart from this, the underlying bullish sentiment in the financial markets further undermined the greenback’s relative safe-haven status.

The market remains optimistic over the prospects for a massive US fiscal spending plan. This comes on the back of the progress in the rollout of vaccines for the highly contagious coronavirus disease and has been fueling expectations for a strong global economic recovery, supporting the prevalent risk-on environment.

Meanwhile, developments to fast-track the US President Joe Biden’s proposed $1.9 trillion COVID-19 stimulus package pushed the US Treasury bond yields to near one-year tops earlier this month. That said, an uptick in the US bond yields did little to impress the USD bulls or stall the GBP/USD pair’s ongoing positive move.

With Wednesday’s positive move, the GBP/USD pair has now cleared a barrier marked by the top boundary of over one-month-old ascending trend-channel. Hence, some follow-through strength beyond the 1.3880 intermediate resistance, towards reclaiming the 1.3900 round-figure mark, now looks a distinct possibility.

Market participants now look forward to the release of the US consumer inflation figures, due later during the early North American session. This, along with the broader market risk sentiment, will influence the USD price dynamics and assist traders to grab some short-term opportunities.

Technical levels to watch