GBP/USD surrenders modest intraday gains to one-week high and flatlines below 1.2300

The GBP/USD pair gained some positive traction on Monday and shot to over a one-week high during the early part of the European session. Spot prices, however, struggled to capitalize on the move or find acceptance above the 1.2300 mark and have now surrendered a major part of the intraday gains.

The recent slump in commodity prices seems to have eased worries about the persistent rise in inflation and forced investors to scale back expectations for a more aggressive policy tightening by the Fed. Apart from this, a goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - undermined the safe-haven US dollar. This, in turn, was seen as a key factor that offered some support to the GBP/USD pair, though the uptick lacks bullish conviction.

The incoming softer UK macro data has raised concerns over British economic growth and fueled recession fears. This, along with expectations that the Bank of England will opt for a more gradual approach towards raising interest rates, has held back traders from placing aggressive bullish bets around the British pound. Apart from this, the UK-EU impasse over the Northern Ireland Protocol of the Brexit agreement further contributed to capping gains for the GBP/USD pair, at least for the time being.

Hence, it will be prudent to wait for strong follow-through buying beyond last week's swing high, around the 1.2325 region, before positioning for any further gains. Market participants now look forward to the US economic docket, featuring the release of Durable Goods Orders and Pending Home Sales data. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.

Technical levels to watch