GBP/USD: Buyers attack 1.3600 as US dollar weakness battles UK’s virus-led lockdown

• GBP/USD trims the previous day’s losses with eyes on April 2018 peak.
• US dollar drops amid cautious optimism backed by virus vaccine, Georgian runoff hopes.
• UK announced third lockdown, fears of South African variant of covid also loom.
• US ISM Manufacturing PMI, UK virus updates and American politics will be the key.

GBP/USD picks up the bids around 1.3590, up 0.17% intraday while heading into the London open on Tuesday. The cable took a U-turn from the fresh high since April 2018 the previous and marked the heaviest losses in a week as the UK bears the burden of the coronavirus (COVID-19) resurgence. However, fresh expectations of battling the virus and further stimulus from the US back the corrective recovery. Hence, virus updates, US political news keep the driver’s seat ahead of the North American session when the US ISM Manufacturing PMI for December will be the key to watch.

With the virus-led death tolls growing past-100,000 in Britain, UK PM Boris Johnson had to option to announce the third national lockdown that is less likely to gain any relaxation before late-February. The moves, announced late-Friday, were already priced and had no major implications afterward. However, the mood remains downbeat as the British medical professional suggests that the COVID-19 variant traced from South Africa has a stronger resistance versus the vaccines and also spreads faster. Also challenging the trading sentiment could be New York’s first case of the covid strain found in the UK as well as Japan’s hint to take strictest activity restrictive measures to tame the pandemic’s resurgence.

On the positive side, the US Food and Drug Administration (FDA) unveiled a nearly 95% success ratio of the leading coronavirus vaccines after two doses. Further, global markets put high hopes of the Democratic victory in the Georgian run-off.

Read: Georgia Elections Preview: Markets geared for a special moment, three scenarios

That said, S&P 500 Futures trim the latest gains to revisit the sub-3,700 area while FTSE 100 drops 0.30% by press time.

Looking forward, a light calendar in Europe may require the GBP/USD traders to closely watch over the British government’s further details on the lockdown as well as Brexit headlines, if any, for fresh impulse. Following that the US ISM Manufacturing PMI details for December will be the key to observe. It should, however, be noted that the risk catalysts will keep the driver’s seat.

Read: US Manufacturing PMI December Preview: COVID is the present but recovery is the future

Technical analysis

10-day SMA, at 1.3565 now, offers immediate support that drives GBP/USD upwards to the latest multi-month high of 1.3704.