The GBP/USD pair shot to a fresh weekly high, albeit quickly retreated a few pips thereafter and was last seen trading with only modest intraday gains, around the 1.3265 region.
Having touched a daily low around the 1.3240 region, the GBP/USD pair attracted some dip-buying on Thursday and moved in the positive territory for the second successive day. The British pound drew some support from the fact that the UK Prime Minister Boris Johnson ruled out the possibility of imposing additional restrictions before Christmas. That said, a combination of factors held back traders from placing aggressive bullish bets and kept a lid on any meaningful upside for the major.
The worsening COVID-19 situations in Britain continued acting as a headwind for the sterling. In fact, Britain reported 90,629 new Covid-19 cases on Tuesday, slightly lower from the all-time high of 91,743 recorded the previous day. Moreover, the UK PM Johnson has said that the Omicron variant related data will be kept under review to see if stricter measures are needed next week. This, along with the UK-EU impasse over the Northern Ireland Protocol, capped gains for the GBP/USD pair, at least for now.
The UK Foreign Minister Liz Truss – now in charge of Brexit negotiations – said that their position on the Northern Ireland Protocol remains unchanged. She further added that we must end the role of the European Court of Justice as a final arbiter in the arrangement and that the UK remains prepared to trigger Article 16 if this does not happen. Apart from this, a modest US dollar strength failed to assist the GBP/USD pair to capitalize on the move and prompted some selling around the 1.3280 area.
The USD remained well supported by the Fed's hawkish outlook, indicating at least three rate hikes next year. This, in turn, warrants some caution before positioning for any further appreciating move amid relatively thin liquidity conditions heading into the year-end holiday season. Traders now look forward to the US economic docket, highlighting the final Q3 GDP print and the Conference Board's Consumer Confidence Index for some short-term opportunities around the GBP/USD pair.
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