The GBP/USD pair caught fresh bids during the early European session and shot to a fresh daily high, around the 1.3245-50 region in the last hour.
Having shown some resilience below the 1.3200 mark on Monday, the GBP/USD pair attracted fresh buying on Tuesday and snapped two successive days of the losing streak. A turnaround in the risk sentiment – as depicted by a generally positive tone around the equity markets – undermined the safe-haven US dollar. This, in turn, was seen as a key factor that provided a modest lift to the major.
That said, the worsening COVID-19 situations could hold back traders from placing aggressive bullish bets around the British pound. In fact, Britain reported a record number of cases and 12 people have died with the new Omicron variant of the coronavirus. Adding to this, the UK Deputy Prime Minister Dominic Raab had refused to rule out a tightening of social restrictions before Christmas.
Meanwhile, concerns about the rapid spread of the new strain and a fatal blow to US President Joe Biden's massive $1.75 trillion spending bill should keep a lid on the optimistic move in the markets. Apart from this, the Fed's hawkish outlook and an uptick in the US Treasury bond yields should act as a tailwind for the greenback, which, in turn, should cap gains for the GBP/USD pair.
Moreover, investors might also be reluctant to place aggressive bets amid relatively thin liquidity conditions heading into the end-of-year holiday season. This warrants some caution before positioning for any further appreciating move for the GBP/USD pair amid absent relevant market-moving economic releases, either from the UK or the US.
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