GBP/USD clings to five-week top around 1.3450 as coronavirus, Brexit fears fade
- GBP/USD seesaws in a choppy range after refreshing multi-day top.
- Easing UK virus cases, government’s assurance of no fresh restrictions during 2021 favored bulls.
- Optimism over new post-Brexit fishing rules, announcement of £75million funding for British ports and processing facilities added to optimism.
- Second-tier US data to entertain traders, risk catalysts are the key.
GBP/USD takes rounds to the recently flashed monthly peak around 1.3440 during an inactive initial Asian session on Tuesday.
The cable pair refreshed the multiday high as upbeat market sentiment and positive news at home offered a double boost to the buyers. Even so, the year-end holiday season restricted the quote’s reaction to the positives.
After multiple days of above 100,000 covid infections, the UK reported 98,515 cases on Monday. Not only the easing of COVID-19 numbers but comments from British Health Secretary Sajid Javid also favored the GBP/USD prices. “The UK's government will not introduce new COVID-19 restrictions for England before the end of 2021,” per UK Health Minister Javid. The British authorities also stated that the ‘temporary’ lockdown restrictions could last until late March in the UK.
Elsewhere, Britain announced a £75million aid package to improve ports and processing facilities, as well as create jobs. The same relief measure joins the latest fishing rules stating the need for 70% British crew and 70% of fish that must be landed in UK ports.
It’s worth noting that studies from South Africa and the UK showing fewer odds of hospitalization due to the Omicron covid variant eased market fears from the South African covid variant. Also on the positive side were comments from US Vice President Kamala Harris who signaled to use her tie-breaking vote to pass President Joe Biden’s Build Back Better (BBB) stimulus plan. Further, ongoing talks over Iran’s denuclearization and a global push for peace between Russia and Ukraine also seem to have favored the GBP/USD buyers.
Against this backdrop, US equities closed higher while the US 10-year Treasury yields eased from the two-week high, dropping 1.7 basis points (bps) to 1.47%.
Looking forward, US housing and Richmond Fed Manufacturing data can offer intermediate relief to the cable pair but major attention will be given to Brexit and Omicron headlines.
Technical analysis
Successful trading beyond the 50-DMA level near 1.3440 becomes necessary for the GBP/USD bulls to aim for the late November’s swing high near 1.3515.