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  • The downbeat market mood benefitted the safe-haven USD and exerted pressure on GBP/USD.
  • Upbeat UK employment details did little to impress GBP bulls or provide any meaningful impetus.

The GBP/USD pair remained depressed below mid-1.3600s, or near multi-day lows and had a rather muted reaction to upbeat UK employment details.

Following the previous day’s two-way price moves, the pair met with some fresh supply on Tuesday and retreated further from 32-month tops, around the 1.3745 region touched last week. A weaker tone around the equity markets drove some haven flows towards the US dollar and was seen as a key factor exerting pressure on the GBP/USD pair.

The global risk sentiment took a hit after German data added to worries about the economic fallout from the coronavirus pandemic. Apart from this, concerns about roadblocks to the US President Joe Biden’s $1.9 trillion stimulus plan. Adding to this, escalating US-China tensions in the South China Sea further weighed on investors’ sentiment.

On the other hand, the British pound failed to gain any respite following the release of upbeat UK jobs report. In fact, the number of people claiming unemployment-related benefits declined to 7K in December as against consensus estimates pointing to a fall to 35K from the previous month’s downwardly revised reading of 38.1K

Meanwhile, the UK unemployment rate edged high to 5.0% from 4.9% but was still better than a rise to 5.1% anticipated. The data, however, did little to impress the GBP bulls or provide any meaningful impetus to the GBP/USD pair. This, in turn, leaves the pair at the mercy of the broader market risk sentiment and the USD price dynamics.

Hence, the market focus will remain on this week’s key US event/data risk. The FOMC is scheduled to announce its monetary policy decision on Wednesday. This will be followed by the release of the Advance US Q4 GDP report. This, along with the US stimulus headlines, will drive the USD in the near-term and provide a fresh directional impetus to the GBP/USD pair.

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