GBP/USD flirts with multi-week lows, around 1.3700 mark post-UK CPI

• GBP/USD added to the overnight losses and dropped to multi-week lows on Wednesday.
• The prevalent risk-off mood underpinned the safe-haven USD and exerted some pressure.
• Softer UK CPI figures did little to impress the GBP bulls or provide any meaningful impetus.

The GBP/USD pair maintained its offered tone near multi-week lows, just above the 1.3700 mark  and had a rather muted reaction to the release of UK consumer inflation figures.

The pair extended the overnight bearish momentum below the 1.3760-50 resistance-turned-support and witnessed some follow-through selling during the first half of the trading action on Wednesday. The upbeat US economic outlook combined with the prevalent risk-off mood continued underpinning the safe-haven US dollar. This, in turn, was seen as a key factor exerting pressure on the GBP/USD pair.

The global risk sentiment took a turn for the worst this week amid growing concerns about the third wave of COVID-19 infections and pandemic-related lockdowns in Europe. Adding to this, a coordinated move by Western countries to impose sanctions on Chinese officials over human rights violations in Xinjiang and potential US tax hikes further dampened investors’ appetite for perceived riskier assets.

The US Treasury Secretary Janet Yellen on Tuesday told lawmakers that tax hikes will be needed to pay for infrastructure projects and other public investments. Separately, Fed Chair Jerome Powell downplayed the risks that economic growth would spur unwanted inflation. This, in turn, dragged the yield on the benchmark 10-year US government bond to 1.60% on Wednesday, albeit did little to dent the underlying bullish sentiment surrounding the USD or lend any support to the GBP/USD pair.

On the economic data front, the headline UK CPI came in to show a modest 0.1% rise in February as against 0.5% anticipated. Adding to this, the yearly rate also missed market expectations and edged down to +0.4% from 0.7% previous. The softer inflation figures failed to impress the GBP bulls or provide any meaningful impetus to the GBP/USD pair, rather has set the stage for additional weakness.

Wednesday’s UK economic docket also highlights the release of flash UK Manufacturing and Services PMI prints for March. Later during the early North American session, the preliminary US PMIs and Durable Goods Order data will influence the USD price dynamics. Traders will further take cues from Fed Chair Jerome Powell’s second day of testimony to grab some meaningful opportunities.

Technical levels to watch