GBP/USD retreats below 1.3650 after touching fresh 31-month high at 1.3686

• GBP/USD edges lower from multi-year high it set earlier.
• Trading action is expected to remain subdued in the remainder of the day.
• US Dollar Index registers small losses ahead of Jobless Claims data.

The GBP/USD pair extended the weekly rally and touched its highest level since May 2018 at 1.3686. Ahead of the American session, however, the pair reversed its direction and was last seen trading at 1.3640, gaining 0.13% on a daily basis.

On Wednesday, the UK parliament approved the trade deal with the UK as expected. Meanwhile, British Health Secretary Matt Hancock announced that they will be tightening coronavirus-related restrictions after confirming more than 50,000 cases on Tuesday.

Nevertheless, these developments failed to trigger a significant market reaction and the broad-based USD weakness allowed GBP/USD to remain bullish.

Later in the day, the weekly Initial Jobless Claims from the US will be the last data release of the year. Ahead of this report, the US Dollar Index is posting small daily losses at 89.63.

GBP/USD 2021 outlook

GBP/USD Price Forecast 2021: Cable braces for calendar comeback amid three exits.

“After a year full of surprises, it is hard to predict, but going on a limb, there is room for the pound to blossom in the spring, as it outperforms rivals in exiting the covid crisis and as Brexit is forgotten,” says FXStreet Analyst Yohay Elam. “Sterling could later turn south once peers catch up and the exit from the EU takes its toll.”

Technical levels to consider