- GBP/USD gains traction for the sixth straight day and climbs to a two-week high.
- The UK government’s U-turn on scraping higher tax rates continues to lift sterling.
- The USD extends its recent sharp retracement slide and offers additional support.
The GBP/USD pair attracts some dip-buying near the 1.1280 region and turns positive for the sixth successive day on Tuesday. The momentum lifts spot prices to a two-week high, back above the 1.1400 mark during the early European session and is sponsored by a combination of factors.
The UK government's U-turn to reverse a controversial tax cut plan announced in its mini-budget last week continues to underpin the British pound. The US dollar, on the other hand, extends its recent sharp pullback from a two-decade high amid the ongoing downfall in the US Treasury bond yields and offers additional support to the GBP/USD pair.
The Bank of England reaffirmed its willingness to buy up to £5 billion of long-dated gilts and this helped drag the US Treasury bond yields further away from a multi-year top touched last week. Apart from this, the prevalent risk-on mood - as depicted by a strong rally across the global equity markets - is seen as another factor weighing on the safe-haven buck.
With the latest leg up, the GBP/USD pair confirms a breakout back above a nearly two-month-old descending trend-line resistance. This might have already set the stage for an extension of the recent recovery from an all-time low touched last Monday. In the absence of any macro data from the UK, spot prices remain at the mercy of the USD price dynamics.
Later during the early North American session, traders will take cues from the US economic docket - featuring the release of JOLTS Job Openings and Factory Orders data. This, along with speeches by FOMC members, the US bond yields and the broader risk sentiment, will drive the USD demand and provide some meaningful impetus to the GBP/USD pair.
Technical levels to watch
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