**GBP/USD Trades with Positive Bias Above 1.3300 Amid Softer USD; Upside Seems Limited**
*Based on an article by Haresh Menghani, FXStreet*
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The GBP/USD currency pair opened the latest Asian trading session with a moderately positive tone, sustaining its levels above the psychological 1.3300 mark. This move came as the US Dollar (USD) experienced a weaker start to the session, pressured by a decline in US Treasury bond yields and a cautiously optimistic tone in the broader financial markets. Nevertheless, despite the intraday uptick, the upside for the British Pound appears limited as markets continue to grapple with a combination of lingering uncertainties. In this article, we dive into the multiple factors influencing GBP/USD, explore technical chart dynamics, and present an outlook for the pair as the week unfolds.
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## Greenback Retreats from Highs, Lifts GBP/USD
* The US Dollar lost its recent positive momentum at the start of the trading day, offering relief to its major counterparts.
* A corrective fall in US Treasury yields, coupled with the broader market’s risk-on sentiment, diminished demand for the safe-haven currency.
* Dovish expectations from the Federal Reserve have led investors to pare back bets on rapid monetary tightening, further weighing on the greenback.
* As a high-beta currency, the British Pound benefited from the prevailing weakness in the US Dollar and the global risk appetite.
The initial pullback in the USD allowed GBP/USD to recover above the 1.3300 handle, reinforcing near-term support and signaling bullish sentiment. However, the gains thus far remain modest, and traders are wary of chasing the move aggressively.
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## Focused Catalysts Driving GBP/USD
### 1. **US Dollar Softens Due to Lower Yields**
– US Treasury yields came under pressure as the market digests recent statements from Federal Reserve officials.
– Diminished expectations for aggressive Fed action led the Dollar Index to retreat from multi-month highs reached earlier.
– The easing of the USD provided much-needed reprieve for the Sterling.
### 2. **Market Sentiment Favors Risk Assets**
– A generally positive risk tone in global equities and commodities offered a supportive environment for GBP and other risk-sensitive currencies.
– The lack of fresh negative headlines related to the Omicron COVID-19 variant bolstered investors’ sentiment.
– The improved mood reduced demand for the “safe haven” US Dollar, creating slight headwinds for USD bulls.
### 3. **Brexit-Related and Domestic UK Headlines**
– Brexit issues, particularly concerning the Northern Ireland Protocol and ongoing UK-EU negotiations, continue to hover in the background.
– While no major escalations have occurred recently, the risk remains that talks could falter, reviving Sterling volatility.
– Domestically, investors keep an eye on the UK’s macroeconomic trajectory and monetary policy signals from the Bank of England (BoE).
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## Limited Upside for Sterling: Key Impediments Persist
While GBP/USD’s rebound above 1.3300 is notable, several factors restrain potential bullish enthusiasm:
### **Lack of Hawkish Momentum from Bank of England**
– The BoE surprised markets at its previous policy meeting by keeping its key interest rates unchanged, despite signaling previously that a hike was on the table.
– Markets now await more concrete signs that policy normalization is on the horizon, but recent soft UK economic data has clouded the timing.
– Without a clear commitment to tightening, Sterling’s appeal remains tempered against currencies with more hawkish central banks.
### **Uncertainties Around Omicron & UK Growth Outlook**
– The emergence of the Omicron COVID-19 variant initially sparked a sharp risk-off move, but as of now, fears have receded somewhat.
– Scientists and policymakers are still assessing the new variant’s impact on hospitalization and the overall economic reopening.
– Should negative news resurface, risk sentiment could quickly
Read more on GBP/USD trading.