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GBP / USD rises above 1.3750 after UK GDP, lacks continuation

  • A combination of factors helps GBP / USD gain positive traction on Wednesday.
  • Better than expected UK fourth quarter GDP figures provide a modest boost to the British pound.
  • A modest USD pullback from multi-month highs continues to support the pair’s bullish move.

The pair GBP/USD has rallied around 40 pips in reaction to an upbeat UK GDP report, climbing back above the 1.3750 level. However, the move has lacked continuation and at the time of writing, the pair is slightly back to the 1.3740 region.

Having defended the 1.3700 level the day before, the pair has captured some buying on Wednesday and has been supported by a combination of factors. The British pound has risen slightly after the UK Office for National Statistics reported that the economy expanded by 1.3% during the fourth quarter of 2020. The reading was above the 1.0% growth previously estimated and was accompanied by a better-than-expected current account deficit.

Apart of this, a modest pullback in the US dollar from four-month highs It has provided an additional boost to the GBP / USD pair, although any significant rally still seems elusive. Investors have held out hope that the impressive pace of coronavirus vaccines and US President Joe Biden’s spending plan will help the US economy lead a global recovery from the pandemic.

This, along with a modest rally in US Treasury yields could continue to prop up the US dollar and limit strong gains for the GBP / USD pair. Therefore, it will be wise to wait for some solid continuation buying before confirming that this week’s slide from the 1.3845 region is over and opening new bullish positions.

Market participants are now awaiting the US economic calendar, which includes releases from ADP’s private sector employment report, Chicago PMI, and pending home sales data. However, the key focus of attention will continue to be details about US President Joe Biden’s infrastructure spending plan of around $ 3-4 trillion.

GBP / USD technical levels

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