GBP/USD benefits from risk reset, coronavirus is the key

• GBP/USD defies the previous two-day losing streak, despite the latest pullback.
• The US dollar trims earlier gains amid the recovery in risk sentiment.
• The UK extends lockdown by at least three weeks, no longer business as usual with China.

GBP/USD slips below 1.2500 while heading into the London open on Friday. Even so, the pair registers 0.30% gains on a day to defy the previous two-day declines. The reason could be traced from the broad US dollar weakness amid risk recovery.

The greenback lost its allure since the early Asian session when news broke that the clinical trials on Gilead’s Remdesivir offer promising results.

Also extending the risk-on were US President Donald Trump’s coronavirus (COVID-19) optimism, despite a high death toll, as well as a push to restart the economy in a phased manner.

On the other hand, the UK’s economic restart is pushed back by at least three weeks citing the delicate stage with over 13,000 deaths. While announcing the extension, the deputized leader Dominic Raab also stated, as per the Telegraph, that it can no longer be "business as usual" with China, as the superpower had "questions to answer" over its handling of the coronavirus pandemic.

Further, The Guardian cites a leaked letter showing the Tory government’s bias towards the National Health Services amid allegations of being short on medical supplies and mishandling of the epidemic.

It’s worth mentioning that the UK PM Boris Johnson’s spokesperson said on Thursday, as per Politico, that the UK needed "legislative and economic flexibility" to manage its response to the coronavirus pandemic and would not seek more time to secure a trade deal with the EU.

Amid all these mixed plays, the market’s risk-tone remains upbeat and favors the US 10-year Treasury yields to rise further beyond covering the previous day’s losses, currently near 0.67%.

Given the lack of major data/events on the economic calendar, traders will keep eyes on the virus updates with hopes of a cure weighing on the US dollar.

Technical analysis

50% Fibonacci retracement of March month upside and the month’s low, around 1.2310 and 1.2165 in that order, are currently on the bear’s radar unless the pair successfully crosses 61.8% Fibonacci retracement level of 1.2520, which in turn could push the recovery towards 100-day EMA level of 1.2650.