GBP/USD steadies around 1.2030 as firmer yields battle with UK’s Covid optimism

• GBP/USD struggles to defend the latest bounce off the intraday low.
• UK rules out publishing Covid R number amid declining virus cases.
• China removes quarantine requirements for inbound travelers, resumes processing citizens' applications for ordinary passports.
• Firmer US Treasury yields, doubts on China Covid unlock keeps bears hopeful amid year-end holiday season.

GBP/USD treads water around 1.2030 as it struggles for clear directions amid mixed clues and the year-end holiday season. The Cable pair welcomed bears the previous day as the US Treasury yields underpinned the US Dollar. However, the Covid-linked optimism in the UK and China puts a floor under the prices.

UK Health Security Agency Chief Data Scientist Nick Watkins said in a statement, per Reuters, “Now that vaccines and therapeutics have allowed us to move to a phase where we are living with COVID-19, with surveillance scaled down but still closely monitored through a number of different indicators, the publication of this specific data is no longer necessary.” The news also stated that Britain will continue to publish its weekly flu and COVID-19 surveillance report and infection surveys.

On the other hand, China announced multiple measures to open national and international boundaries in a rush to convey the easing of COVID-19 fears. In doing so, the dragon nation initially ruled out the quarantine requirement for inbound travelers before stating that the nation will resume citizens' applications for ordinary passports for tourism and visits abroad from January 8, 2023.

Even so, a US Official mentioned, per Reuters, that the US government may impose new COVID-19 measures on travelers to the United States from China over concerns about the "lack of transparent data" coming from Beijing.

It’s worth noting that the positive headlines surrounding the virus renewed hawkish concerns over the US Federal Reserve (Fed) and propelled the US Treasury yields, which in turn allowed the US Dollar Index (DXY) to regain upside momentum the previous day. The greenback’s gauge versus the six major currencies grinds higher to around 104.20 by the press time.

Amid these plays, the 10-year Treasury bond yields remain sidelined near 3.85%, after refreshing the six-week high the previous day, whereas the S&P 500 Futures remain indecisive while tracking the mixed closing of the Wall Street benchmarks.

Moving on, the US Pending Home Sales for November which holds the market consensus of 0.6% versus -4.6% previous readings could decorate the calendar but is unlikely to move the market amid the holiday mood.

Technical analysis

An upward-sloping support line from November 30, around the 1.2000 psychological magnet by the press time, restricts the GBP/USD pair’s short-term downside. Alternatively, a convergence of the 200-SMA and one-week-old descending trend line highlights the 1.2080 level as the key upside hurdle for the Cable bulls.