GBP/USD climbs to fresh weekly high, above 1.3600 mark amid renewed USD weakness

• GBP/USD gained traction for the third successive day and climbed to a fresh weekly high.
• Rising bets for additional BoE rate hikes in 2022 acted as a tailwind for the British pound.
• Retreating US bond yields undermined the USD and remained supportive of the move up.

The GBP/USD pair climbed to a fresh weekly high during the first half of the European session and is now looking to build on the momentum further beyond the 1.3600 mark.

A combination of supporting factors assisted the GBP/USD pair to reverse an intraday dip to the 1.3555 area and move into positive territory for the third successive day on Thursday. As investors digest contradicting geopolitical headlines, the emergence of fresh US dollar selling acted as a tailwind for the pair. Apart from this, rising bets for additional interest rate hikes by the Bank of England underpinned the British pound and provided an additional lift to the major.

Russian media reported earlier today that the Ukrainian military forces fired mortars and grenades in four Luhansk People's Republic (LPR) localities, though Ukraine denied the accusations. Moreover, the Russian Ministry of Defense said that around 10 military convoys have left Crimea and released a video showing a logistics unit coming back to its home base after the completion of drills. This, in turn, capped the upside for the safe-haven USD and extended support to the GBP/USD pair.

Apart from this, less hawkish FOMC minutes released on Wednesday, along with retreating US Treasury bond yields further undermined the greenback. Policymakers agreed that it would be appropriate to remove policy accommodation at a faster pace than anticipated if inflation does not move down as they expect. The minutes, however, failed to reinforce expectations for a 50 bps rate hike in March, which have helped the greenback to gain some meaningful traction in the recent sessions.

It, however, remains to be seen if the GBP/USD pair is able to capitalize on the move or meets with a fresh supply at higher levels amid tensions over the Northern Ireland Protocol. In the absence of any major market-moving economic releases from the UK, the pair remains at the mercy of the USD price dynamics and geopolitical developments. Later during the early North American session, traders will take cues from the US economic docket, featuring the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data.

Technical levels to watch