GBP/USD struggles near multi-week lows, remains vulnerable

• GBP/USD struggled to preserve early gains to levels just above the 1.3700 mark.
• Sustained USD buying turned out to be a key factor that prompted fresh selling.
• The set-up favours bearish traders amid tensions over COVID-19 vaccine supplies.

The GBP/USD pair witnessed some selling during the early European session and dropped to fresh multi-week lows, around the 1.3670 region in the last hour.

The pair failed to capitalize on its intraday uptick to the 1.3705-10 region, instead met with some fresh supply and now seems set to prolong its short-term bearish trajectory. The US dollar stood tall near four-month tops amid the upbeat US economic outlook and got an additional boost from a modest uptick in the US Treasury bond yields. This was seen as one of the key factor exerting some downward pressure on the GBP/USD pair.

The British pound was pressured by further pressured by tensions over COVID-19 vaccine supplies. It is worth mentioning that the European Commission reportedly has threatened to ban exports of Oxford-AstraZeneca vaccines to countries that have higher vaccination rates, including Britain. This raised fears that a significant shortage in vaccine supplies could derail the UK government's plan to exit the current lockdown.

That said, the UK and the EU have said that they are working together to improve their relationship and expand vaccine supply for all. This, along with a generally positive tone around the equity markets, might hold traders from placing aggressive bullish bets around the safe-haven USD and help limit further losses for the GBP/USD pair. Nevertheless, the path of least resistance for the major remains on the downside.

Market participants now look forward to the Bank of England Governor Andrew Bailey's comments during a virtual panel discussion hosted by the Bank for International Settlements. Later during the early North American session, the release of the final US Q4 GDP print might also provide some impetus. This, along with scheduled speeches by a slew of FOMC member, might influence the USD and produce some trading opportunities around the GBP/USD pair.

Technical levels to watch