GBP/USD consolidates recent gains to multi-week top, just below mid-1.3400s

• GBP/USD was seen oscillating in a range near a five-week high through the early European session.
• Receding Omicron fears underpinned the sterling, though a modest USD strength capped the upside.

The GBP/USD pair consolidated its recent gains to a five-week high and remained confined in a narrow trading band, around the 1.3435 region through the first half of the European session.

The pair struggled to capitalize on the previous day's positive move and witnessed subdued/range-bound price action on Tuesday amid thin liquidity on the back of a bank holiday in the UK. The US dollar drew some support from the Fed's hawkish outlook, which, in turn, was seen as a key factor that acted as a headwind for the GBP/USD pair.

That said, sliding US Treasury bond yields, along with receding fears over the economic impact of the new strain kept a lid on any meaningful gains for the safe-haven greenback. Adding to this, more positive news concerning the Omicron variant continued underpinning the British pound and extended some support to the GBP/USD pair.

In the latest development, the UK health secretary Sajid Javid announced that there will be no further restrictions introduced in England before New Year. This added to the optimism led by reports that the new strain may be less severe than the previous Delta variant and a UK study that Omicron infections are less likely to lead to hospitalization.

Nevertheless, the fundamental backdrop supports prospects for an extension of the recent recovery from the vicinity of mid-1.3100s, or the YTD low touched earlier this month. Bulls, however, are likely to wait for a sustained strength beyond the 50-day SMA before positioning for a further near-term appreciating move amid absent relevant UK macro releases.

Meanwhile, the US economic docket features the release of the Richmond Manufacturing Index later during the early North American session. The data, along with the US bond yields and the broader market risk sentiment, might influence the greenback. This, in turn, should assist traders to grab some short-term opportunities around the GBP/USD pair.

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