GBP/USD flirts with daily low, eyeing 1.3100 mark amid broad-based USD strength

The GBP/USD pair remained on the defensive heading into the North American session and was last seen trading near the daily low, around the 1.3120 region.

The pair struggled to capitalize on its early modest uptick on Friday, instead met with a fresh supply near the 1.3180-1.3185 region and was pressured by a combination of factors. A dovish assessment of the Bank of England monetary policy decision on Thursday was seen as a key factor that acted as a headwind for the British pound. Apart from this, a goodish pickup in the US dollar demand prompted some intraday selling around the GBP/USD pair.

The lack of progress in the Russia-Ukraine peace negotiations kept a lid on the recent optimism and tempered investors' appetite for perceived riskier assets. Traders also seemed nervous ahead of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping. This was evident from a generally weaker tone around the equity markets, which, in turn, extended some support to traditional safe-haven assets, including the greenback.

Apart from this, the Fed's hawkish outlook, indicating that it could raise interest rates at all the six remaining meetings in 2022, further underpinned the buck. The combination of supporting factors, to a larger extent, helped offset a softer tone around the equity markets and did little to dent the intraday bullish sentiment surrounding the USD. That said, the lack of follow-through selling around the GBP/USD pair warrants caution for bearish traders.

This, along with the overnight bounce, makes it prudent to wait for a convincing break through the 1.3100 mark before positioning for any further depreciating move. Sustained weakness below will suggest that the recent strong recovery move from the lowest level since November 2020, has run its course. The GBP/USD pair might then turn vulnerable to accelerate the fall to challenge the 1.3000 psychological mark, or the YTD low touched earlier this week.

Market participants now look forward to the US economic docket, featuring the release of Existing Home Sales. The data might do little to influence the USD price dynamics as the focus remains on fresh developments surrounding the Russia-Ukraine saga. Apart from this, the headlines coming out of the Biden-Xi meeting might influence the broader market risk sentiment and produce some short-term trading opportunities around the GBP/USD pair.

Technical levels to watch