GBP/USD pares intraday gains above 1.2000 as risk-aversion intensifies, Covid, Ukraine eyed

GBP/USD slides to 1.2025 as it consolidates the intraday gains, the first in three days, during the early Thursday morning in London. The Cable pair’s latest weakness could be linked to the escalated fears surrounding COVID-19 and the Russia-Ukraine tussles. However, a retreat in the US Treasury yields put a floor under the prices.

The UK is among the major seven nations, including the US, South Korea, Japan, Taiwan, Italy and India, that recently announced Covid test requirements for Chinese travelers as the virus cases swirl in the dragon nation but Beijing reverses the “Zero-Covid” policy.

On the other hand, Russia’s rejection of peace with Ukraine unless it accepts the treaty allowing additional territories, as well as an escalated war in the city of Kherson, weighs on the market sentiment. Recently, explosions were heard in Kyiv after a Ukrainian diplomat warned of a missile launch.

It should be noted, however, that the mixed US data and absence of the hawkish Fed rhetoric seem to defend the GBP/USD buyers amid the year-end inaction. That said, US Pending Home Sales for November dropped to -37.8% YoY versus -36.7% expected and -37.0% previous readings while the Richmond Fed Manufacturing Index for December improved to 1.0 versus -4.0 anticipated and -9.0 prior.

Against this backdrop, the US 10-year Treasury yields dropped 2.6 basis points to 3.86% by the press time, after rising the most since October 19 the previous day. Furthermore, S&P 500 Futures remain indecisive as downbeat bond coupons put a floor under the stock futures even as Wall Street closed in the red.

Looking forward, a light calendar and the sour sentiment may recall the GBP/USD bears even as the likely increase in the US Initial Jobless Claims could weigh on the US Dollar.

Technical analysis

A five-week-old ascending trend line, around 1.2000 by the press time, restricts the short-term downside of the Cable pair. Even so, the GBP/USD bulls are likely to remain absent unless the quote prints a daily closing beyond the 200-DMA resistance, around 1.2050 at the latest.