GBP/USD refreshes session tops post-UK GDP, lacks follow-through buying

• A combination of factors assisted GBP/USD to gain positive traction on Wednesday.
• Better-than-expected UK Q4 GDP figures provided a modest lift to the British pound.
• A modest USD pullback from multi-month tops remained supportive of the move up.

The GBP/USD pair rallied around 35 pips in the last hour and refreshed session tops in reaction to an upbeat UK GDP report. The pair was last seen trading around mid-1.3700s, up 0.10% for the day.

Having defended the 1.3700 mark in the previous session, the pair attracted some dip-buying on Wednesday and was supported by a combination of factors. The British pound got a minor lift after the UK Office for National Statistics reported that the economy expanded by 1.3% during the fourth quarter of 2020. The reading was above the 1.0% growth estimated earlier and was accompanied by less worse than expected current account deficit figures.

Apart from this, a modest US dollar pullback from four-month tops provided an additional boost to the GBP/USD pair, though any meaningful upside still seems elusive. Investors remained hopeful that the impressive pace of coronavirus vaccinations and US President Joe Biden's spending plan will help the US economy lead a global recovery from the pandemic.

This, along with a modest pickup in the US Treasury bond yields, might continue to underpin the greenback and keep a lid on any strong gains for the GBP/USD pair. Hence, it will be prudent to wait for some strong follow-through buying before confirming that this week's slide from the 1.3845 region has run its course and placing fresh bullish bets.

Market participants now look forward to the US economic docket, featuring the releases of the ADP report on private-sector employment, Chicago PMI and Pending Home Sales data. The key focus, however, will remain on details about US President Joe Biden's infrastructure spending plan of around $3 trillion to $4 trillion.

Technical levels to watch