GBP/USD advances to multi-week high, focus remains on US PPI and FOMC minutes

• GBP/USD scales higher for the sixth successive day and climbs to a near three-week high.
• Retreating US bond yields and a positive risk tone undermine the USD and lend support.
• Traders now look to the US PPI and FOMC meeting minutes for some meaningful impetus.

The GBP/USD pair gains some positive traction for the sixth successive day on Wednesday and climbs to a near three-week high during the Asian session. Spot prices currently trade just below the 1.2300 round-figure mark and remain well supported by the prevalent selling bias surrounding the US Dollar (USD).

The recent dovish remarks by several Federal Reserve (Fed) officials forced investors to scale back their bets for more aggressive policy tightening by the US central bank and continue to drag the US Treasury bond yields lower. This, in turn, undermines the Greenback and acts as a tailwind for the GBP/USD pair. In fact, Atlanta Fed President Raphael Bostic said on Tuesday that the US central bank does not need to raise interest rates any further and that he sees no recession ahead.

Apart from this, the risk-on mood turns out to be another factor weighing on the safe-haven buck and lending additional support to the GBP/USD pair. Despite escalating geopolitical tensions in the Middle East, diminishing odds for further rate hikes by the Fed continue to boost investors' appetite for riskier assets. This is evident from a generally positive tone around the equity markets and is seen driving flows away from traditional safe-haven currencies, including the greenback.

That said, the markets are still pricing in the possibility of at least one more Fed rate hike move by the end of this year. This is holding back traders from placing aggressive bearish bets around the USD. Apart from this, firming expectations that the Bank of England (BoE) will maintain the status quo in November might contribute to capping the GBP/USD pair. In fact, the BoE surprisingly paused its rate-hiking cycle in September and provided little hints of its intention to raise rates.

This makes it prudent to wait for strong follow-through buying before positioning for an extension of the GBP/USD pair's recent recovery move from the 1.2035 area, or its lowest level since March touched last week. Market participants now look forward to the US Producer Price Index (PPI) and the FOMC meeting minutes for some meaningful impetus later during the North American session. The focus will then shift to Thursday's release of the latest US consumer inflation figures.

Technical levels to watch