GBP/USD: Indecisive at multi-month high above 1.3700, eyes US stimulus, Federal Reserve

GBP/USD seesaws around 1.3730 after refreshing the 32-month high during early Wednesday. The quote initially cheered the market’s optimism surrounding the coronavirus (COVID-19) vaccine and the US dollar weakness before allowing the bulls to catch a breather amid virus woes in the UK and wait for the key Federal Reserve meeting.

With the British covid death toll crossing 100,000, UK PM Boris Johnson said, “Sorry” even as the UK’s vaccine plan is on target to immunize all above 50 Britons by March. The PM also warned the EU he expected it to honor government contracts for Covid-19 vaccines, per Daily Mail, as the bloc threatened to impose strict controls of Pfizer vaccine on the UK, said the Metro.

The raw between the European Union (EU) and the UK also grows when it comes to Brexit as bloc’s financial services chief Mairead McGuinness said, per Independent, an EU forum for discussing financial services with Britain will be similar to what the United States has, and it must be in place before market access will be considered.

On the other hand, Britain is up for discussing a post-Brexit trade deal for financial services with Switzerland.

Elsewhere, US President Joe Biden’s readiness to escalate the vaccination and upbeat signals from global pharmacy companies favored the risks. Also on the positive side were comments from the US Congress member relating to Biden’s fiscal stimulus. As per Reuters, “US Senate Majority Leader Chuck Schumer saying Democrats will move forward on President Joe Biden’s coronavirus relief plan without Republican support if necessary.”

It should, however, be noted that the pre-Fed cautious sentiment questions buyers in Asia-Pacific. Also portraying the tensed tone are downbeat Futures in the UK and the US as well as stable yields of the US 10-year Treasury yields.

Moving on, a light calendar in the UK and the presence of the US Federal Reserve’s first meeting for 2021 keeps GBP/USD traders worries ahead of the event. While the Fed is expected to announce a dovish halt and likely to please the cable bulls, any surprises won’t be taken lightly considering the International Monetary Fund’s (IMF) downward revision to the British GDP for 2021. “Britain's GDP is expected to grow by 4.5% in 2021, down from a previously predicted 5.9%, according to the International Monetary Fund's latest World Economic Outlook,” mentioned Sky News.

Technical analysis

FXStreet’s Omkar Godbole backs the GBP/USD bulls while saying,

GBP/USD's immediate technical bias remains bullish, as the higher lows and higher highs setup on the daily chart is still intact. Acceptance under Tuesday's low of 1.3609 would invalidate the higher lows setup and shift the attention to the 50-day Simple Moving Average (SMA), which restricted the downside two times in December. The 50-day SMA is currently located at 1.3483.

Read: Fed Preview: Fearing market froth or boosting Biden's stimulus? Three scenarios