GBP/USD holds steady near mid-1.3500s, 100-DMA as traders await the key NFP report

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  • GBP/USD gained some positive traction and build on the overnight bounce from sub-1.3500 levels.
  • A positive risk tone, softer US bond yields undermined the safe-haven USD and extended support.
  • Investors seemed to have moved on the sidelines and waited for the release of the US NFP report.

The GBP/USD pair maintained its bid tone, around the 1.3540-50 area through the first half of the European session, albeit seemed struggling to break through the 100-day SMA resistance.

Following the previous day’s modest pullback and the subsequent bounce from sub-1.3500 levels, the GBP/USD pair managed to regain positive traction on Friday amid modest US dollar weakness. A generally positive tone around the equity markets was seen as a key factor that undermined the safe-haven greenback and extended some support to the major.

The British pound was further underpinned by hopes that the Omicron outbreak won’t derail the UK economy and rising bets for additional interest rate hikes by the Bank of England. That said,  the worsening COVID-19 situation in Britain could act as a headwind for the sterling and keep a lid on any further gains for the GBP/USD pair, at least for now.

Investors also seemed reluctant to place aggressive bets, rather preferred to wait on the sidelines ahead of Friday’s release of the closely watched US monthly jobs data. The popularly known NFP report, due later during the early North American session, will be looked upon to reinforce growing market expectations about a faster policy tightening by the Fed.

It is worth recalling that the December 14-15 FOMC monetary policy meeting minutes released on Wednesday indicated that the US central bank could hike interest rates earlier than anticipated. Hence, a stronger reading would reaffirm hawkish Fed expectations, which should be enough to provide a fresh lift to the USD and prompt some selling around the GBP/USD pair.

Apart from this, the broader market risk sentiment will influence the USD price dynamics. Traders will further take cues from developments surrounding the coronavirus saga to grab some short-term opportunities around the GBP/USD pair.

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