GBP / USD declines from multi-year highs, still comfortable above 1.3900

• GBP / USD continued to climb higher on Tuesday and soared to fresh 34-month highs.
• The impressive pace of COVID-19 vaccines in the UK sustained the British pound.
• Market optimism weighed on the dollar as a safe haven and continued to act as supportive.

The pair GBP/USD it lost a significant portion of its 34-month intraday gains and has now slipped to the lower end of its daily range, although it has managed to stay above the 1.3900 mark.

A combination of support factors helped the pair gain some follow-up traction for the third consecutive session on Tuesday and prolong its recent bullish trajectory. The British pound continued to benefit from the Bank of England’s neutral policy stance, the continued drop in new coronavirus cases and the impressive rate of vaccination in the UK.

The British government reached the milestone of vaccinating 15 million of its most vulnerable people, or a quarter of its population, on February 15. This would allow British Prime Minister Boris Johnson to lift the restrictions sooner rather than later and jump-start the economy. This, coupled with the sustained selling bias of the US dollar, provided an additional boost to the GBP / USD pair.

Progress on COVID-19 vaccines and expectations for a massive US fiscal spending plan have fueled optimism about a strong global economic recovery. This, in turn, continued to boost investor sentiment, which was evident from the current bullish streak in equity markets and undermined the USD’s relative safe-haven status vis-à-vis its British counterpart.

Meanwhile, the US bond market has weighed the likelihood that the $ 1.9 trillion stimulus package proposed by US President Joe Biden will pass. In fact, yields on the benchmark 10-year US government bond surpassed 1.25% and rose to the highest level since February 2020, though they did little to ease the strongly offered tone surrounding the dollar.

That said, the slightly overbought conditions on the short-term charts prevented bull traders from making any new bets and kept any further gains for the GBP / USD pair limited. However, the short-term bias remains skewed in favor of bullish traders and supports the prospects for a move towards a recovery of the key psychological mark of 1.4000 amid the absence of relevant economic releases to move the market.

Technical levels