GBP/USD struggles near daily lows, below mid-1.3600s

• A combination of factors exerted pressure on GBP/USD for the second straight day.
• The prevalent risk-off mood continued driving some haven flows towards the USD.
• The imposition of fresh COVID restrictions in the UK further took its toll on the pound.

The GBP/USD pair maintained its offered tone through the first half of the European session and was last seen hovering near daily lows, around the 1.3640-35 region.

The pair extended the previous day’s sharp retracement slide from the 1.3755-60 region, or fresh 32-month tops and witnessed some follow-through selling for the second consecutive session on Thursday. The prevalent risk-off environment continued driving some haven flows towards the US dollar and was seen as one of the key factors exerting pressure on the GBP/USD pair.

Given that a lot of positive news was already priced in the markets, investors turned cautious amid doubts about the timing and size of a new US stimulus package. Apart from this, dovish FOMC acted as a catalyst that prompted some aggressive selling in the equity markets. The Fed raised concerns about the pace of recovery amid the continuous surge in coronavirus cases.

On the other hand, the British pound was pressured by growing worries about the potential economic fallout from the imposition of fresh restrictions in the UK. In fact, the UK government announced new measures to clamp down on travel from 22-high risk nations. Adding to this, Prime Minister Boris Johnson indicated that COVID-19 lockdown would last until March 8.

Meanwhile, the GBP/USD pair has now moved well within the striking distance of weekly lows, around the 1.3610 region touched on Tuesday. Sustained weakness below should be seen as a fresh trigger for bearish traders and pave the way for an extension of the ongoing corrective slide. The pair might then turn vulnerable to fall further towards the key 1.3500 psychological mark.

Market participants now look forward to the release of the Advance US Q4 GDP report, due later during the early North American session. This, along with the broader market risk sentiment, will play a key role in influencing the USD price dynamics. Apart from this, development surrounding the coronavirus saga might further produce some trading opportunities around the GBP/USD pair.

Technical levels to watch