- GBP/USD gained strong positive traction on Wednesday and shot to a fresh weekly high.
- Retreating US bond yields undermined the USD and remained supportive of the move.
- Traders might be reluctant to place aggressive bullish bets ahead of the US CPI report.
The GBP/USD pair maintained its strong bid tone heading into the North American session and was last seen trading near the weekly high, just below the 1.3600 mark.
Following the two-way/directionless price moves witnessed over the past two trading sessions, the GBP/USD pair caught fresh bids on Wednesday and was supported by modest US dollar weakness. A sharp pullback in the US Treasury bond yields, along with the risk-on impulse turned out to be key factors that undermined the safe-haven greenback.
Apart from this, the intraday positive move could further be attributed to some technical buying above the 1.3550-1.3555 horizontal resistance. It, however, remains to be seen if bulls are able to capitalize on the upward trajectory or opt to lighten their bets ahead of the latest US consumer inflation figures, scheduled for release on Thursday.
It is worth recalling that the markets have been pricing in a more aggressive policy response by the Fed to combat stubbornly high inflation and anticipate a 50 bps rate hike in March. Hence, the US CPI report will play a key role in determining the Fed's policy outlook, which will influence the USD and provide a fresh directional impetus to the GBP/USD pair.
In the meantime, the US bond yields and the broader market risk sentiment will continue to play a key role in driving the USD demand. This, in turn, should provide some impetus to the GBP/USD pair and allow traders to grab some short-term opportunities amid absent relevant market-moving economic releases, either from the UK or the US.
Technical levels to watch
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