GBP/USD climbs to fresh two-week tops

The recent rise in COVID-19 cases in the UK might act as a headwind for the British pound.

The GBP/USD pair shot to two-week tops during the early European session, with bulls now looking to build on the momentum further beyond the 1.3800 round-figure mark.

Following the previous day’s brief pause, the GBP/USD pair caught some fresh bids on Tuesday and prolonged its recent strong rebound from the 1.3600 neighbourhood or one-month lows. The uptick was exclusively sponsored by the prevalent selling bias surrounding the US dollar, which continues to be pressured by Fed Chair Jerome Powell’s comments on Friday.

During the highly anticipated speech at the Jackson Hole Symposium, Powell reassured the market that the Fed is in no hurry to raise interest rates. Powell confirmed that the central bank plans to begin rolling back its pandemic-era stimulus later this year but offered no signal on the specific timeline. His remarks were interpreted as dovish by the market.

This was evident from the ongoing decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond dropped to 1.27% during the first half of the trading action on Tuesday. Apart from this, a generally positive tone around the equity markets further undermined the safe-haven USD and provided a goodish lift to the GBP/USD pair.

It, however, remains to be seen if bulls are able to capitalize on the move amid the recent surge in new COVID-19 cases in the UK. According to the official figures released on Monday, another 26,476 people in Britain tested positive for COVID-19. This might act as a headwind for the British pound and cap any further gains for the GBP/USD pair, at least for now.

Even from a technical perspective, the pair was last seen hovering near a confluence hurdle comprising of the very important 200-day SMA and the 50% Fibonacci level of the recent leg down. This further makes it prudent to wait for some follow-through buying before placing fresh bullish bets around the GBP/USD pair and positioning for any further appreciating move.

There isn’t any major market-moving economic data due for release from the UK on Tuesday, leaving the GBP/USD pair at the mercy of the USD price dynamics. Later during the early North American session, traders might take cues from the US economic docket, featuring the releases of Chicago PMI and the Conference Board’s Consumer Confidence index.

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