GBP/USD Tops Five-Week High Amid Weaker Dollar

The GBP/USD pair traded on a quiet tone in the early European session on Tuesday after recording a spike to a five-week high at 1.3448 earlier today.

The Cable struggled to build upon the upbeat momentum from the previous day and remained subdued within a range amid an absence of liquidity due to the holidays in the US and the UK. Meanwhile, the greenback continued to show strength following the hawkish comments from the US Federal Reserve, which acted against a seamless upwards move for the GBP/USD pair.

That said, plummeting US Treasury bond yields coupled with declining fears over the economic impact of the Omicron variant restricted any meaningful inflow into the safe-haven USD. Furthermore, confidence-boosting reports on the new COVID-19 strain underpinned support for the Sterling, which extends to the GBP/USD pair.

GBP/USD Bulls Favored by Fundamental Factors

Moving on, the UK health secretary Sajid Javid recently announced that the nation is unlikely to introduce additional restrictions before New Year. This assertion, coupled with the fact that the Omicron variant might not be as deadly as previously feared, boosted investors’ optimism.

Nonetheless, the fundamental factors overwhelmingly support a stronger Pound against the Dollar and should boost the price of the GBP/USD pair in the near term. However, bulls could remain on the sidelines until the sighting of a breakout confirmation above the 1.3500 top in the coming days. This should be a long wait considering the absence of market-moving economic data this week, as the world takes a break ahead of New Years’ celebrations.