GBP/USD sits near daily high, lacks bullish conviction and remains below 1.3300

GBP/USD managed to defend and attract buying in the vicinity of the 1.3200 mark on Monday.
Remarks by BoE’s Broadbent provided an additional boost, though stronger USD capped gains.
Hawkish Fed expectations, rebounding US bond yields continued underpinning the greenback.
The GBP/USD pair continued gaining traction through the mid-European session and shot to a fresh daily high, around the 1.3285 region in the last hour.

Having defended the 1.3200 mark, the GBP/USD pair witnessed some short-covering move on the first day of a new week and reversed a major part of Friday’s decline back closer to the YTD low. The UK’s move to gran a new batch of licenses for French ships seeking to work in British waters was seen as a sign of progress on a broader trade agreement. This, in turn, was seen as a key factor that extended some support to the British pound.

The intraday buying picked up pace in reaction to the Bank of England (BoE) Deputy Governor Ben Broadbent’s remarks, saying that inflation is likely to rise further over the next few months. During a scheduled speech on the outlook for growth, inflation, and monetary policy Broadbent further noted that inflation will comfortably exceed 5% in April and added that there are good reasons to think that this rapid rise in prices is likely to fade.
Nevertheless, the comments seem to have lifted market expectations for an imminent interest rate hike by the BoE at its upcoming policy meeting on December 16. That said, the UK-EU standoff over how to regulate trade in Northern Ireland held back bulls from placing aggressive bets. This, along with sustained US dollar buying, might keep a lid on any meaningful upside for the GBP/USD pair amid absent relevant market-moving economic releases.

The greenback continued drawing support from the prospects for a faster policy tightening by the Fed amid growing worries about rising inflationary pressures. In fact, the Fed funds futures indicate that investors have been pricing in the possibility of a liftoff by May 2022. This, along with the risk-on impulse in the markets, triggered a solid recovery in the US Treasury bond yields and underpinned the greenback, capping gains for the GBP/USD pair.

Even from a technical perspective, the uptick stalled near the 100-hour SMA resistance. This further makes it prudent to wait for a strong follow-through buying before confirming that the GBP/USD pair has formed a base near the 1.3200 area and positioning for a further near-term appreciating move.