GBP/USD climbs to fresh session tops, around 1.3925 region

• A combination of factors assisted GBP/USD to catch some fresh bids on Tuesday.
• The improving COVID-19 situations in the UK acted as a tailwind for the sterling.
• A softer tone surrounding the USD remained supportive of the intraday move up.

The GBP/USD pair edged higher through the first half of the European session and climbed to fresh daily tops, around the 1.3925 region in the last hour.

Following the overnight intraday pullback of over 50 pips, the GBP/USD pair regained positive traction on Tuesday and for now, seems to have snapped two consecutive days of the losing streak. The optimism over the declining trend of new COVID-19 cases in the UK continued acting as a tailwind for the British pound. This, along with a softer tone surrounding the US dollar, turned out to be key factors that provided a modest lift to the major.

In fact, the key USD Index languished near one-month lows touched last week amid firming expectations that the Fed would retain its ultra-lose monetary policy stance for a longer period. Apart from this, Monday's disappointing US ISM Manufacturing PMI and the risk-on impulse in the markets further undermined the safe-haven greenback. That said, a solid bounce in the US Treasury bond yields might help limit any deeper losses for the USD.

Meanwhile, evidence of a more robust UK economic recovery now seemed to have fueled speculations that the Bank of England (BoE) could be among the first major central banks to begin the process of weaning its economy off stimulus support. Hence, the market focus will remain on the upcoming BoE monetary policy meeting on Thursday. Heading into the key event risk, investors might refrain from placing aggressive bets, which might cap gains for the GBP/USD pair.

Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market-moving economic releases, either from the UK or the US. That said, the broader market risk sentiment might influence the USD price dynamics and provide some short-term trading impetus to the GBP/USD pair.

Technical levels to watch