GBP / USD returns initial gains and retraces near the 1.3550 region

• The renewed selling bias around the USD helped GBP / USD regain positive traction on Tuesday.
• The imposition of the third nationwide lockdown in the UK limits strong gains.
• The USD remains under pressure despite the uncertainty about the runoff elections in Georgia.

The pair GBP/USD has rapidly receded more than 50 pips at the start of the European session on Tuesday and has fallen to the lower end of its daily range, just above the 1.3550 region.

After the rejection drop the day before, from the 1.3700 level to new 32-month highs, The pair regained positive traction on Tuesday amid the surge of some new selling around the US dollar.. In fact, the dollar has struggled to attract any safe-haven demand and has been under pressure near its two-and-a-half-year lows during the first half of trading action on Tuesday.

The hopes of a strong global economic recovery in 2021 continue to support underlying bullish sentiment in financial markets. This, coupled with the likelihood of further US fiscal stimulus and expectations that the Fed would keep rates lower for a longer period, has continued to weigh on the safe-haven US dollar. This has been seen as a key factor that has supported the GBP / USD pair.

Meanwhile, Investors remain concerned about the continued rise in new COVID-19 cases and the imposition of the third nationwide lockdown in the UK. On top of this, concerns about the exclusion of the crucial UK service sector from the Brexit deal could prevent sterling bulls from opening aggressive positions. This, in turn, has limited the strong gains of the GBP / USD pair.

Apart of this, doubts about the effectiveness of the vaccine against the new strain of coronavirus from South Africa and the uncertainty about the second round of elections in Georgia They seem to have tempered enthusiasm. Voting for the elections in Georgia begins later this Tuesday and the result of two Senate seats will have an impact on President-elect Joe Biden’s ability to pursue his preferred economic policies.

In the absence of major UK economic releases, it will be prudent to wait for follow-up buying before positioning yourself for the resumption of the recent GBP / USD uptrend. Meanwhile, the US economic calendar highlights the publication of the ISM manufacturing PMI.

GBP / USD technical levels