GBP/USD off the lows, looks to regain 1.3650 ahead of US data, Powell

Fresh bids emerged once again near the 1.3615 region, allowing a bounce in GBP/USD back towards 1.3650 ahead of the European session.

Despite the quick pullback, the bulls remain cautious ahead of the critical US weekly jobless claims data and a scheduled speech by the Fed Chair Jerome Powell. Investors will watch out for any hints on tapering amidst ongoing chatter over the taper talks, although many of the Fed officials dismissed the chances of tapering.

The main event risk for the USD traders will likely remain President-elect Joe Biden’s expected $2 trillion stimulus package, the report of which triggered a rebound in the US dollar and the Treasury yields in the last hours. The stimulus package in the offer is expected to be $700 billion higher than the $1.3 trillion proposed by Senator Chuck Schumer. 

On the GBP-side of the story, ramping up of the vaccinations and stricter restrictions on international arrivals in the UK to curb the virus spread is likely to keep the sentiment around the pound underpinned. Prime Minister Boris Johnson said tougher restrictions brought in last week were starting to have an effect on the spread of COVID in some parts of the country.

Looking ahead, the major will remain at the mercy of the dollar trades and sentiment around the Treasury yields amid expectations of a bigger stimulus and ahead of the key US data, Powell’s and Biden’s speech.

GBP/USD technical levels