GBP/USD trades with modest gains around 1.2930 area, lacks follow-through

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  • A subdued USD price action extended some support to GBP/USD on Friday.
  • The prevalent risk-off mood might help limit the fall for the safe-haven USD.
  • Fears of new COVID-19 restrictions in the UK should cap any strong gains.

The GBP/USD pair quickly recovered around 40 pips from sub-1.2900 levels and refreshed daily tops in the last hour, albeit lacked any strong follow-through.

The pair struggled to capitalize on the previous day’s late rebound of around 45 pips from near two-week lows and was seen oscillating in a range through the first half of the trading action on Friday. The US dollar bulls refrained from placing fresh bets amid the uncertainty about the actual outcome of the US presidential election. A subdued USD demand was seen as a key factor lending some support to the GBP/USD pair.

However, concerns about the economic fallout from the continuous surge in new coronavirus cases continued weighing on investors’ sentiment. This was evident from a steep decline in the US equity markets, which extended some support to the greenback’s relative safe-haven status. The greenback was further supported by Thursday’s stronger US Q3 GDP growth figures. This, in turn, capped the upside for the GBP/USD pair.

Investors also seemed reluctant, rather prefered to remain on the sidelines amid persistent Brexit-related uncertainties. Adding to this, fears that the UK government could impose stricter/nationwide lockdown measures to curb the rapid rise in new COVID-19 case might further collaborate to keep a lid on any further gains for the GBP/USD pair.

There isn’t any major market-moving economic data due for release from the UK. Meanwhile, the US economic docket features the second-tier releases of Core PCE Price Index, Chicago PMI and revised Michigan Consumer Sentiment. The data, along with the broader market risk sentiment, will influence the USD price dynamics and produce some trading opportunities.

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