GBP/USD sits at six-week highs above 1.3800 as US dollar licks its wounds

• GBP/USD extends the recent uptrend to test six-week highs.
• The depressed US dollar underpins the cable amid firmer Treasury yields.
• Softer UK inflation shakes off Nov BOE rate hike bets, Brexit woes loom.

GBP/USD is holding higher ground above 1.3800, sitting at the highest levels in six weeks, as the US dollar licks its wounds amid a mixed market sentiment.

The US dollar is in a bearish consolidative mode across its main peers, extending its week-long correction from yearly tops of 94.56 reached last week, as investors continue to liquidate their long USD positions heading into a potential Fed’s tapering next month.

Further, strong US corporate earnings-induced record run on Wall Street indices add to the weight on the safe-haven dollar, boding well for higher-yielding currencies such as the cable.

Despite the upsurge, the bulls remain cautious amid the relentless rise in the US inflation expectations and Treasury yields. Meanwhile, looming Brexit concerns could also hamper GBP/USD’s run higher.

According to The Guardian, “a new report on trafficking in the UK has warned that Brexit and the Home Office’s new plan for immigration is increasing the risks to trafficking victims.”

Looking ahead, the dynamics in the US dollar and the yields will have a significant bearing on the major, as investors shrugged off an unexpected dip in the UK Consumer Price Index (CPI) in September, which arrived at 3.1% YoY vs. 3.2% expected.

Softer UK inflation doused the Bank of England (BOE) November rate hike expectations and briefly weighed on the pound a day before. Additionally, resurfacing concerns over a rising number of COVID-19 cases in the Kingdom also poses a threat to the pair’s upside.

Attention turns towards the US weekly Jobless Claims release and Fedspeak for fresh incentives on trading cable amid a relatively data-light week.

GBP/USD: Technical levels to consider