GBP / USD rises to the 1.3380 region and points to the previous day’s highs

• A combination of factors helps GBP / USD regain some positive traction on Tuesday.
• The Fed’s pessimistic expectations and optimism for a COVID-19 vaccine weigh on the safe-haven USD.
• The British pound remains supported by hopes of a last-minute Brexit trade deal.

The selling bias around the USD has accelerated at the start of the European session on Tuesday and has pushed GBP / USD to fresh daily highs, around the 1.3375-80 region.

Following the previous day’s pullback of around 65-70 pips, the pair managed to regain traction on Tuesday and has been supported by a combination of factors. As investors looked past Monday’s optimistic US PMI numbers, speculation of further easing of monetary policy by the Fed triggered some new selling around the US dollar. This, in turn, has been seen as one of the key factors driving the GBP / USD pair higher.

On the other hand, Sterling remains backed by hopes for a last-minute Brexit deal, despite the lack of progress on three sticking points: the so-called level playing field, fishing and state aid rules. It is worth remembering that the EU’s chief Brexit negotiator Michel Barnier said on Monday that fundamental differences remain in trade talks with the UK.

From a technical perspective, the emergence of some lower level buying on Tuesday favors the bulls and supports prospects for a further short-term upward move for GBP / USD. That said, investors could still wait for a sustained breakout above the resistance marked by the upper end of a two-month-old bull channel, around the 1.3400 level, before opening new bullish positions.

There is no important economic data from the UK. Meanwhile, the US economic calendar features releases from the Conference Board Consumer Confidence Index and the Richmond Fed Manufacturing Index. This, coupled with Brexit related news, should generate some significant trading opportunities around the GBP / USD pair.

GBP / USD technical levels