GBP/USD sits near 4-1/2-month tops, around mid-1.3100s
- Sustained USD selling assisted GBP/USD to gain traction for the tenth consecutive day on Friday.
- Growth concerns, fiscal impasse, a steep decline in the US bond yields weighed heavily on the buck.
- Technical buying above 1.3100 mark remained supportive; overbought conditions warrant caution.
The GBP/USD pair broke out of its European session consolidation phase and jumped to fresh multi-month tops, around the 1.3160 region in the last hour.
The pair prolonged its recent strong bullish trajectory and continued gaining positive traction for the tenth consecutive session on Friday. The prevalent bearish sentiment surrounding the US dollar was seen as one of the key factors fueling the momentum, which got an additional boost from some technical buying above the 1.3100 mark.
Investors remain worried that the ever-increasing number of coronavirus cases could undermine the US economic recovery. The market concerns resurfaced following the release of the advance US GDP report on Thursday, which showed that the world's largest economy collapsed by 32.9% annualized pace during the second quarter of 2020.
The greenback was further pressured by a more dovish FOMC statement on Wednesday, the ongoing downfall in the US Treasury bond yields and the impasse over the next round of the US fiscal measures. It is worth reporting that Republicans and Democrats have been struggling to reach a deal ahead of the expiry of some earlier provisions this Friday.
The USD remained depressed and failed to gain any respite following the release of second-tier US economic data – Core PCE Price Index and Personal Income/Spending data. Friday's US economic docket also features the release of Chicago PMI and Revised Michigan Consumer Sentiment, though is unlikely to provide any meaningful impetus.
With the USD price dynamics turning out to be an exclusive driver of the GBP/USD pair strong move up, bulls seemed rather unaffected by renewed lockdown measures in northwest England. The UK government imposed new restrictions on 4.3 million people in Greater Manchester, parts of West Yorkshire and East Lancashire after the recent rise in new coronavirus cases.
Meanwhile, extremely overbought conditions on short-term charts warrant some caution before placing fresh bullish bets. Nevertheless, the GBP/USD pair seems all set to post strong gains for the second consecutive week – also marking its fourth week of a positive move in the previous five – and record the highest weekly close since late January.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
