- GBP/USD added to the previous day’s strong gains and scaled higher for the second straight day.
- The Fed’s dovish outlook, sliding US bond yields undermined the USD and remained supportive.
- Brexit jitters might hold bulls from placing aggressive bets and cap any further gains for the pair.
The GBP/USD pair shot to three-day tops during the mid-European session, with bulls now looking to build on the momentum beyond the 1.3600 mark.
The pair built on the overnight strong intraday rally of around 130 pips and gained follow-through traction for the second successive day on Tuesday. The momentum pushed the GBP/USD pair further away from Friday’s five-week lows and was exclusively sponsored by the prevalent selling bias surrounding the US dollar.
The greenback was weighed down by the fact that the Fed stuck to its transitory inflation narrative and indicated that policymakers were in no rush to raise borrowing costs. This, along with a fresh leg down in the US Treasury bond yields, further undermined the greenback and provided a goodish lift to the GBP/USD pair.
That said, a cautious market mood could lend some support to the greenback’s relative safe-haven status. Apart from this, worries that the UK government will trigger Article 16 of the Northern Ireland Protocol might hold bullish traders from placing aggressive bets and cap the upside for the GBP/USD pair.
This, along with last week’s dovish Bank of England decision, suggests that the ongoing positive move runs the risk of fizzling out rather quickly. Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) for October later during the early North American session.
Apart from this, the Fed Chair Jerome Powell’s remarks at an online conference, the US bond yields and the broader market risk sentiment will influence the USD price dynamics. Traders might further take cues from the BoE Governor Andrew Bailey’s scheduled speech for some trading opportunities around the GBP/USD pair.