- GBP/USD regained positive traction on Tuesday and built on the overnight bounce.
- The upbeat market mood weighed on the safe-haven USD and remained supportive.
- Rallying US bond yields helped limit the USD losses and capped gains for the major.
The GBP/USD pair maintained its bid tone through the early North American session and was last seen hovering near the top end of its daily trading range, around the 1.3615-20 region.
The pair built on the previous session's intraday bounce of around 80 pips and gained some follow-through traction during the first half of the trading action on Tuesday. The uptick was supported by the emergence of some US dollar selling, through lacked any strong bullish conviction.
The prevalent upbeat market mood – as depicted by a positive trading sentiment around the equity markets – prompted some profit-taking around the safe-haven USD. The already upbeat market mood got an additional boost amid the increasing likelihood for additional US fiscal stimulus measures.
The market has been pricing in the prospects for more aggressive fiscal spending in 2021 under Joe Biden's presidency. The bets increased further after reports indicated that US Treasury Secretary nominee Janet Yellen will urge lawmakers to act big to avert a protracted downturn.
Against the backdrop of expectations for a larger government borrowing, the risk-on flow triggered a fresh leg up in the US Treasury bond yields. This, in turn, might help limit the USD losses and keep a lid on any runaway rally for the GBP/USD pair, at least for the time being.
Apart from this, the imposition of more travel restrictions in the UK further held the GBP bulls from placing aggressive bets. This makes it prudent to wait for some strong follow-through buying before positioning for any further near-term appreciating move for the GBP/USD pair.
In the absence of any major market-moving economic releases, Tuesday's key focus will be on Janet's confirmation hearing before the Senate Finance Committee. This, along with the broader market risk sentiment, might influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.
Technical levels to watch
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