- A modest USD pullback assisted GBP/USD to regain some positive traction on Wednesday.
- A fresh leg up in the US bond yields should help limit the USD fall and cap gains for the pair.
- Investors now look forward to the latest US consumer inflation figures for a fresh impetus.
The GBP/USD pair rallied around 65-70 pips from intraday lows and jumped back above the 1.3900 mark during the first half of the European session.
Following an early slide to the 1.3845 region, the pair attracted some dip-buying on Wednesday and turned positive for the second consecutive session. The underlying bullish sentiment – as depicted by a fresh leg up in the equity markets – weighed on the safe-haven US dollar. This, in turn, was seen as a key factor that assisted the GBP/USD pair to regain positive traction.
That said, a combination of factors might help limit any meaningful USD slide and keep a lid on any strong gains for the GBP/USD pair. Investors remain optimistic about the prospects for a strong US economic recovery amid the impressive pace of COVID-19 vaccinations and the passage of a much-awaited $1.9 trillion pandemic relief package proposed by President Joe Biden.
Apart from this, a modest pickup in the US Treasury bond yields might further extend some support to the greenback. The upbeat US economic outlook has been fueling speculations for a possible uptick in US inflation and raised doubts that the Fed will retain ultra-low interest rates for a longer period, which might continue pushing the US bond yields higher.
Hence, Wednesday’s key focus will be on the release of the latest US consumer inflation figures, scheduled for release later during the early North American session. The US CPI figures, along with the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
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