GBP/USD faces resistance around 1.2200 despite solid UK Retail Sales

The GBP/USD pair is sensing pressure while bridging the marginal gap in surpassing the round-level resistance of 1.2200 in the early Asian session. The Cable is struggling to extend its rally further as a decline in the demand for US government bonds is weighing on positive market sentiment. Considering the selling pressure on the Pound Sterling, it is highly likely that the Cable will correct further.

Meanwhile, S&P500 futures have extended their losses following the late sell-off on Monday, portraying that the market sentiment is getting risk-averse. It seems that the risk appetite of the market participants has been trimmed ahead of the speech from Federal Reserve (Fed) chair Jerome Powell. The US Dollar Index (DXY) is likely to remain on tenterhooks as the speech from Fed Powell will provide cues about the likely monetary policy for the February meeting.

In a few trading sessions, the US Dollar Index has faced immense volatility after a severe contraction in Manufacturing and Services PMI in the United States economy along with a meaningful drop in wage inflation. However, Fed policymakers are seeing no change in terminal rate projections.

San Francisco Fed Bank President Mary Daly dictated that December wage data was one month of data, which can't be declared as a victory. It's too soon to declare victory and stop rate hikes. To tame stubborn inflation, it is reasonable for interest rates to be at 5%-5.25%. Also, Atlanta Federal Reserve bank president Raphael Bostic sees interest rate peak in a 5%-5.25% range and the central bank will continue keeping higher interest rates active beyond CY2023.

On the United Kingdom front, Bank of England (BoE) Chief Economist Huw Pill cited that supply-chain disruptions appear to have eased in recent months, as reported by Reuters. He warned that imported gas prices have remained significantly higher than in the past, then the threat of a second round may well remain.

Meanwhile, the release of an upbeat Like-for-Like Retail Sales (Dec), reported by the British Retail Consortium (BRC) has failed to provide support to the Pound Sterling. The economic data has climbed to 6.5% vs. the former release of 4.1% on an annual basis.