GBP/USD surrenders intraday gains, flirts with session lows near 1.3670 area

GBP/USD struggled to preserve early gains and retreated around 50 pips from tops.
Concerns about the economic impact of COVID-19 held bulls from placing fresh bets.
A modest pickup in the USD demand exerted some additional pressure on the major.
The GBP/USD pair retreated around 50 pips from daily tops and has now dropped to the lower end of its intraday trading range, around the 1.3675 region.

The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 1.3720-25 region and might now be looking to extend its pullback from the highest level since May 2018. The British pound was weighed down by Friday’s disappointing UK macro data – Retail Sales figures and PMI prints – that added to worries about a slowdown in the economic activity.

This, along with reports that the new UK variant was not only highly infectious but perhaps more deadly, held the GBP bulls from placing fresh bets and capped the upside for the GBP/USD pair. Apart from this, concerns about the potential economic fallout from the ever-increasing coronavirus cases benefitted the US dollar’s relative safe-haven status against its British counterpart.
That said, expectations that a massive US fiscal stimulus will boost the global economic recovery might keep a lid on any meaningful upside for the greenback. This makes it prudent to wait for some strong follow-through selling, possibly below Friday’s swing lows around the 1.3635 region, before confirming that the GBP/USD pair has topped out in the near-term.

There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, developments surrounding the coronavirus saga will play a dominant role in driving the broader market risk sentiment and influence the USD price dynamics. Apart from this, traders might take cues from a scheduled speech by the BoE Governor Andrew Bailey.

The key focus, however, will be on the latest FOMC monetary policy decision on Wednesday. This will be followed by the release of Advance US Q4 GDP report on Thursday, which should provide a fresh directional impetus to the greenback and help determine the near-term trajectory for the GBP/USD pair.