- GBP/USD struggled to capitalize on its intraday positive move beyond the 1.3700 mark.
- Surging US bond yields helped revive the USD demand and capped gains for the major.
- The downside seems cushioned as the focus remains on the upcoming BoE meeting.
The GBP/USD pair retreated around 40 pips from daily tops and was last seen trading with only modest gains, around the 1.3670-75 region.
Following the previous day’s pullback from the vicinity of multi-year tops, around the 1.3755-60 supply zone, the pair regained positive traction on Tuesday and climbed back above the 1.3700 mark. The prevalent upbeat market mood undermined the safe-haven US dollar and pushed the GBP/USD pair higher through the first half of the trading action.
The global risk sentiment got a strong lift after Democrats late Monday filed a $1.9 trillion budget measure in a step toward bypassing Republicans and eventual passage of President Joe Biden’s COVID-19 relief package. This move came even as a group of Republican senators visited the White House to discuss a scaled-back $618 billion alternative plan.
Meanwhile, expectations of a larger government borrowing, along with the risk-on flows triggered a fresh leg up in the US Treasury bond yields. Apart from this, the emergence of some selling around the shared currency helped revive the USD demand, which, in turn, capped any further gains for the GBP/USD pair, instead prompted some selling at higher levels.
That said, the downside is likely to remain cushioned amid diminishing odd for any BoE interest rate cut in 2021. Hence, investors might refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the BoE policy meeting on Thursday. In the meantime, the USD price dynamics might produce some short-term trading opportunities.
Technical levels to watch
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