GBP/USD slips below 1.2700 mark, downside seems limited ahead of FOMC minutes

The GBP/USD pair extends the overnight pullback from a multi-day top, around mid-1.2700s and continues losing ground through the Asian session on Wednesday. Spot prices slid back below the 1.2700 round-figure mark and remain well within the striking distance of the 100-day Simple Moving Average (SMA) support near the 1.2620-1.2615 region, or the lowest level since June 30 touched on Monday.

The underlying bullish sentiment surrounding the US Dollar (USD), bolstered by expectations that the Federal Reserve (Fed) will stick to its hawkish stance, turns out to be a key factor exerting some downward pressure on the GBP/USD pair. Investors seem convinced that the US central bank will keep interest rates higher for longer and the bets were reaffirmed by the upbeat US Retail Sales data released on Tuesday, which indicated that consumer spending held up well in July.

That said, a 20 points slump in the Empire State Manufacturing Index to a reading of -19 in August reaffirms market expectations that the Fed will pause its rate-hiking cycle at the upcoming meeting in September. This, in turn, holds back the USD bulls from placing fresh bets and might lend some support to the GBP/USD pair. Traders also seem reluctant and prefer to wait for the release of the FOMC meeting minutes, which might provide fresh cues about the future rate-hike path.

Heading into the key event risk, traders will take cues from the US economic docket, featuring the release of Building Permits, Housing Starts and Industrial Production figures. In the meantime, strong wage growth data, which added to worries about long-term inflation and might force the Bank of England (BoE) to raise interest rates further, should contribute to limiting losses for the GBP/USD pair. This warrants caution before positioning for any further intraday downfall.

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