• GBP/USD picks up bids to snap two-day downtrend as market sentiment improves.
• Softer Covid infections from China, a stimulus measure for real-estate firms favored mild risk-on mood.
• Hawkish Fedspeak, pre-event anxiety and looming concerns over the UK government workers’ nationwide strike test bulls.
• BOE Governor Bailey Testimony, US CB Consumer Confidence eyed for fresh impulse.

GBP/USD cheers the broad-based US Dollar selling amid firmer sentiment while refreshing the daily top to 1.2000 during early Tuesday morning in Europe. In doing so, the Cable pair also portrays the trader’s optimism ahead of Bank of England (BOE) Governor Andrew Bailey’s testimony before the Lords Economic Affairs Committee.

The recovery in the market’s mood could be linked to An easing in China’s daily covid infections from an all-time high of 40,347, to 38,645. On the same line could be the upbeat performance of Chinese equities as the national securities regulator lifted a ban on equity refinancing for listed property firms, per Reuters. “The China Securities Regulatory Commission (CSRC) said late on Monday it would broaden equity financing channels, including private share placements for China and Hong Kong-listed Chinese developers, lifting a ban that has been in place for years,” mentioned the news.

Elsewhere, Looming fears of public servants’ nationwide strike in the UK joined British Prime Minister (PM) Rishi Sunak’s readiness to jostle with China to challenge the GBP/USD bulls ahead of the key event, namely BOE Governor Bailey’s testimony.

UK PM Rishi Sunak’s indirect attack on Chinese policies joined British Foreign Secretary James Cleverly’s statements pushing Beijing to take note of the lockdown protests to highlight the recently sour terms between Britain and China.

It should be noted, however, that the hawkish Fedspeak and doubts over China’s ability to overcome the pandemic fears challenge the GBP/USD bulls. That said, Richmond Federal Reserve Bank President Thomas Barkin recently mentioned that he supports smaller interest-rate hikes ahead as the central bank moves to bring down too-high inflation. Previously, Cleveland Fed President Loretta Mester marked the need to see several more good inflation reports and more signs of moderation to back the pause in rate hikes. On the same line, St. Louis Fed President James "Jim" Bullard stated that the situation calls for much higher interest rates than what we've been used to. Further, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation and keep them there for all of next year. Additionally, Fed Vice Chair Lael Brainard advocated for tighter monetary policy while citing risk-management reasons.

While portraying the mood, the US stock futures and equities in the Asia-Pacific region print mild gains despite the downbeat performance of Wall Street. Further, the US 10-year Treasury yields remain depressed near 3.69% by the press time and weigh on the US Dollar amid the risk-on mood.

Moving on, the tone of BOE Governor Bailey will be crucial for the GBP/USD pair traders as markets brace for a 50 bps rate hike in December. That said, the BOEWatch tool suggests a nearly 85% chance of the UK central bank’s announcements of a 50 basis points (bps) rate hike in the next monetary policy meeting.

Also important will be the monthly US Confederation Board’s (CB) Consumer Confidence for November, as well as multiple speeches from the US Federal Reserve (Fed) officials ahead of Wednesday’s scheduled public appearance of Fed Chairman Jerome Powell.

Technical analysis

Although the 10-DMA triggered the GBP/USD pair’s rebound, currently around 1.1960, the recovery moves remain elusive unless crossing the previous support line from November 10, close to 1.2095 at the latest.