GBP/USD jumps to fresh daily high, closer to mid-1.3200s amid weaker USD

• GBP/USD reversed an intraday dip to sub-1.3200 levels amid a modest USD pullback.
• Upbeat UK jobs data further underpinned the British pound and remained supportive.
• The upside seems limited ahead of the highly-anticipated FOMC/BoE policy meetings.

The intraday USD selling bias pushed the GBP/USD pair to a fresh daily high, closer to mid-1.3200s during the mid-European session.

The pair continued showing some resilience below the 1.3200 round-figure mark and attracted fresh buying on Tuesday amid a modest US dollar pullback from a one-week high. The market concerns over the spread of the Omicron eased on the back of reports that two doses of Pfizer-BioNTech vaccine give 70% protection against the new variant. This, in turn, undermined the greenback's relative safe-haven status and provided a goodish lift to the GBP/USD pair.

The British pound was further benefitted from Tuesday's upbeat UK employment details. The UK Office for National Statistics reported that the number of people claiming unemployment-related benefits declined by 49.8K in November. Adding to this, the ILO Unemployment Rate edged lower to 4.2% during the three months to October. This was seen as another factor that contributed to the GBP/USD pair's intraday positive move of over 50 pips.

That said, a further appreciating move still seems elusive amid the imposition of fresh COVID-19 restrictions in the UK and persistent Brexit uncertainties. The latest development surrounding the coronavirus saga might have forced investors to push back their expectations for an imminent interest rate hike by the Bank of England in England. This, in turn, should hold back traders from placing aggressive bullish bets around the GBP/USD pair.

Meanwhile, growing acceptance that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation should limit any meaningful USD decline. In fact, the money markets indicate the possibility of an eventual liftoff by June 2022 and another hike as early as November. This could further keep a lid on any meaningful upside for the GBP/USD pair ahead of this week's key central bank event risks.

The Fed will announce the outcome of a two-day monetary policy meeting on Wednesday, while the BoE MPC is scheduled to meet on Thursday. This further makes it prudent to wait for a strong follow-through buying before confirming that the GBP/USD pair has bottomed out in the near term. Conversely, bearish traders are likely to wait for acceptance below the 1.3200 mark before positioning for an extension of the recent downward trajectory.

Market participants now look forward to the release of the US Producer Price Index (PPI) for some impetus later during the early North American session. This, along with the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.

Technical levels to watch