GBP/USD jumps to one-month high, 1.3400 mark back in sight ahead of US data

• GBP/USD gained strong positive traction for the third successive day on Thursday.
• Receding Omicron fears turned out to be a key factor that benefitted the sterling.
• A modest USD strength could keep a lid on any further gains ahead of the US data.

The GBP/USD pair broke out of its intraday consolidative trading range and shot to a near one-month high, around the 1.3385 region during the early part of the European session.

The pair prolonged this week's solid rebound from the vicinity of the YTD low, around the 1.3175 region and gained strong follow-through traction for the third successive day on Thursday. The latest optimism led by reports that the current vaccines may be more effective than first thought in fighting the new variant helped offset worries about surging COVID-19 cases in the UK. This was seen as a key factor that acted as a tailwind for the British pound.

Meanwhile, a South African study suggested reduced risks of hospitalisation and severe disease in people infected with Omicron compared with the Delta strain. The news added to the optimistic market mood, which, in turn, undermined the greenback's safe-haven status. That said, an uptick in the US Treasury bond yields, along with the Fed's hawkish outlook helped limit the USD losses. This, along with Brexit uncertainties, could cap gains for the GBP/USD pair.

the UK Foreign Minister Liz Truss – now in charge of Brexit negotiations – said that their position on the Northern Ireland Protocol remains unchanged. Truss reiterated that we must end the role of the European Court of Justice as a final arbiter in the arrangement and that the UK remains prepared to trigger Article 16 if this does not happen. Conversely, the Irish Prime Minister was noted saying that talks between the EU and the UK were on track for progress.

Nevertheless, the GBP/USD pair, so far, has managed to preserve its strong intraday gains and a move beyond the post-BoE swing high might have already set the stage for additional gains. There isn't any major market-moving economic data due for release from the UK. Hence, the USD price dynamics will continue to play a key role in influencing the pair. Later during the early North American session, traders will take cues from the US macro releases.

The US economic docket highlights the release of Core PCE Price Index and Durable Goods Orders data. This, along with the development surrounding the coronavirus saga and the broader market risk sentiment, will drive the USD demand and provide some impetus to the GBP/USD pair. Apart from this, traders will further take cues from the incoming Brexit-related headlines to grab some short-term opportunities.

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