GBP/USD retreats from multi-year tops, still well bid above mid-1.3600s

• GBP/USD refreshed multi-year tops on Wednesday, albeit struggled to sustain above 1.3700 mark.
• A modest uptick in the US bond yields helped revive the USD demand and prompted some selling.

The GBP/USD pair shot to fresh multi-year tops during the mid-European session, albeit quickly retreated around 50 pips thereafter. The pair was last seen trading just above mid-1.3600s, up 0.25% for the day.

The pair added to the previous day’s positive move and continued scaling higher through the first half of the trading action on Wednesday. The momentum was fueled by some intraday selling around the US dollar and got an additional boost following the release of stronger-than-expected UK CPI figures.

The optimism over the rollout of vaccines for the highly contagious coronavirus disease and hopes for additional US fiscal stimulus measures remained supportive of the prevalent upbeat market mood. This, in turn, was seen as one of the key factors that undermined demand for the safe-haven greenback.

US Treasury Secretary nominee Janet Yellen’s comments on Tuesday further lifted the market expectations for more aggressive fiscal spending under Joe Biden’s presidency. At her confirmation hearing, Yellen urged lawmakers to act big on COVID-19 relief package and not to worry too much about debt burden.

Despite the supporting factors, the GBP/USD pair once again struggled to capitalize on the move beyond the 1.3700 mark amid a modest USD bounce. The likelihood of a larger government borrowing, along with a modest led to a modest uptick in the US Treasury bond yields and extended some support to the USD.

Investors also seemed to have turned cautious ahead of the President-elect Joe Biden’s inaugural ceremony later this Wednesday. Meanwhile, repeated failures to find acceptance above the 1.3700 mark also warrants some caution for bulls and before positioning for any further appreciating move.

In the meantime, market participants now look forward to a scheduled speech by the Bank of England Governor Andrew Bailey. Apart from this, the broader market risk sentiment will influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.

Technical levels to watch