GBP/USD retreats to daily lows, back below mid-1.3500s

• GBP/USD managed to gain some positive traction on Monday amid sustained USD selling bias.
• Trump signed US stimulus bill and added to the Brexit optimism, which undermined the buck.
• Holiday-thinned trading volumes held investors from placing aggressive bets and capped gains.

The GBP/USD pair surrendered a major part of its intraday uptick and has now retreated to the lower end of its daily range, below mid-1.3500s.

Following the previous session’s intraday pullback of around 80 pips from the vicinity of YTD tops, the pair managed to regain some positive traction on the first day of a new trading week. The uptick was supported by the optimism about a last-minute Brexit deal and sustained US dollar selling bias.

It is worth reporting that the United Kingdom finally reached a long-awaited post-Brexit trade deal with the European Union on the Christmas Eve. However, the fact that the outcome was largely priced in the market, the British pound saw a “sell the fact” reaction to the announcement on Thursday.

Meanwhile, the US dollar dropped back closer to multi-year lows after the US President Donald Trump signed a $2.3 trillion pandemic aid and spending package. The bill restores unemployment benefits to millions of Americans and averted a federal government shutdown that would have started on Tuesday.

However, a goodish pickup in the US Treasury bond yields helped limit deeper losses for the greenback. This, coupled with worries about the discovery of a new faster-spreading variant of the coronavirus and imposition of lockdowns in the UK, kept a lid on any runaway rally for the GBP/USD pair.

Moreover, investors also seemed reluctant to place any aggressive bets amid thin trading volumes and absent relevant market moving economic releases. That said, fresh developments surrounding the coronavirus saga might still infuse some volatility and produce some short-term trading opportunities.

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