GBP/USD slides to fresh daily low, around 1.3275 region amid firmer USD

The GBP/USD pair edged lower during the early European session and dropped to a fresh daily low, around the 1.3275 region in the last hour.

The pair struggled to capitalize on this week's recovery from sub-1.3200 levels or the YTD low set on Tuesday and has been oscillating in a narrow trading band over the past three trading sessions. The UK-EU impasse over the Northern Ireland Protocol and the worsening row over the post-Brexit fishing rights between France and Britain turned out to be a key factor that acted as a headwind for the British pound. This, along with the emergence of some US dollar buying, prompted some selling around the GBP/USD pair on the last day of the week.

The greenback continues to draw support from firming expectations that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. In fact, the money markets started pricing in the possibility of liftoff in June 2022 in reaction to Fed Chair Jerome Powell's hawkish comments earlier this week. In his congressional testimony, Powell said that the Fed is likely to speed up the tapering of its asset purchases. Several FOMC members also backed the case for a faster pace of rolling back the pandemic-era stimulus.

That said, mixed performance in the equity markets could hold back traders from placing aggressive bullish bets around the safe-haven greenback. The market risk sentiment stabilized a bit amid easing fears about the economic impact of the new and possible vaccine-resistant Omicron variant of the coronavirus. This, along with the passage of a bill to fund the US government through mid-February, further boosted investors' confidence. Traders might also prefer to move on the sidelines ahead of Friday's release of the closely-watched US monthly jobs data.

The popularly known NFP report will play a key role in influencing the USD price dynamics and provide some meaningful impetus to the GBP/USD pair later during the early North American session. Apart from this, trades will further take cues from developments surrounding the coronavirus saga and Brexit-related headlines to grab some short-term opportunities around the major.

Technical levels to watch