GBP/USD recovers early lost ground, moves back above 1.3800 mark
|- GBP/USD attracted some dip-buying on Friday and recovered a major part of intraday losses.
- The USD pared early gains and was seen as a key factor lending some support to the major.
- A sudden pickup in the US bond yields continued to underpin the USD and capped the upside.
The GBP/USD pair managed to recover a major part of its intraday losses to multi-day lows and has now moved back above the 1.3800 round-figure mark.
Following a muted reaction to better-than-expected UK GDP report, the pair attracted some dip-buying near the 1.3775 region and stalled this week's corrective slide from 34-month tops. The British pound remained well supported by growing optimism that the UK's lead in terms of the coronavirus vaccination drive could facilitate an earlier easing of lockdown restrictions.
On the other hand, the US dollar trimmed a part of its intraday gains amid a modest rebound in the US equity futures. This was seen as another factor that contributed to the intraday bounce of around 35 pips. That said, a sudden pick up in the US Treasury bond yields continued underpinning the buck and kept a lid on any further gains for the GBP/USD pair, at least for now.
The US bond market continued to react strongly to prospects for the passage of the US President Joe Biden's proposed $1.9 trillion COVID-19 stimulus package. This makes it prudent to wait for some strong follow-through buying before traders again start positioning for an extension of the GBP/USD's pair recent strong positive move witnessed over the past two weeks or so.
Market participants now look forward to Friday's only US data, the Michigan Consumer Sentiment Index for February. The data, along with the US bond yields and the broader market risk sentiment, will play a key role in influencing the USD price dynamics. This should assist traders to grab some short-term opportunities on the last day of the week.
Technical levels to watch
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