Sterling has turned tail after an overnight rally, with bears once again selling into strength, which has been a common obstacle for cable rallies recently.
GBP/USD earlier hit a 1-week high of 1.1971 nL1N2BI0KY on news that the U.S. Senate had reached a deal on a $2tn relief bill, but fresh selling knocked it back below the 10-DMA and down 0.4% on the day.
On the plus side, GBP/USD risk metrics have retreated from extremes.
One-month GBP/USD 25RR FXVV has risen off recent post-Brexit lows at -4, back at -2.95, though it remains below its 30-DMA at -0.77.
GBP/USD spot volatility has also fallen off extreme highs by 22 on Monday, to its current 16, but remains elevated relative to its 30-DMA at 10 vols.
GBP/USD bulls also received a boost from softer liquidity pressures as GBP 3-month currency swap spreads have narrowed from March 16's -58 to +9bps currently GBPCBS3M=TTKL.
The reduced volatility in GBP spot FX and funding markets is generally supportive for GBP/USD as the pair builds a buffer above 35-year lows.
However, today's early NorAm price volatility, with GBP/USD trading in a 1.1912-1.1712 range hints that even with outsized accommodation, the coronavirus story remains fluid, and a deterioration in global health and economic expectations may once again give the advantage to GBP bears nL1N2BI0C3.