- GBP / USD extends the recovery from the two-week lows set on Monday amid subdued demand from the USD.
- The rally in US bond yields should help limit the USD’s slide and limit the pair’s rally.
- Nervousness over COVID-19 and negative rate speculation from the BoE could help limit the pair’s gains.
The pair GBP/USD it has risen to fresh daily highs, around the 1.3565-70 region, at the start of the European session on Tuesday, although it has rapidly retreated a few pips since then. At the time of writing, the pair is still holding positive on the day around the 1.3550 region.
The pair has built on the previous day’s bounce, from the 1.3450 zone at a two-week lows, and has moved higher at the start of the European session on Tuesday. The US dollar is consolidating its recent strong recovery gains from the lowest level in nearly three years and has been seen as one of the key factors behind the pair’s intraday rally.
GBP / USD has recovered its losses recorded on Monday, but lacks a strong continuation buy. US Treasury yields are prolonging their recent strong rally amid hopes for additional US fiscal stimulus. This, in turn, should help limit any significant decline in the USD and limit the rise of the pair, at least for now.
The rising expectations that the president-elect Joe Biden would push for a more aggressive spending plan in 2021 led to a sudden spike in U.S. Treasury yields In fact, the 10-year government bond yield saw its biggest weekly rise since June last week and has now risen to the highest level since March 2020.
Apart from this, new speculation that the Bank of England will push interest rates below zero They could also prevent sterling bulls from opening aggressive positions. Market expectations have resurfaced after comments from Silvana Tenreyro, a member of the Bank of England’s Monetary Policy Committee, on Monday when she said that work on the feasibility of negative rates is still under study.
This is due to the increasing concerns about the possible economic consequences of the continued increase in new coronavirus cases and the imposition of a third nationwide lockdown in the UK. Therefore, any subsequent positive movement could still be seen as a selling opportunity and risks fading away fairly quickly.
GBP / USD technical levels
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