GBP/USD drops to fresh daily low, around 1.1500 mark amid broad-based USD strength

• GBP/USD comes under some selling pressure on Monday amid sustained USD buying.
• Elevated US bond yields and the risk-off impulse lifts demand for the safe-haven buck.
• The downside seems limited ahead of the key central bank event risks later this week.

The GBP/USD pair struggles to find acceptance above the 1.1600 mark on Monday and retreats over 100 pips from the daily peak. Spot prices extend the steady intraday descent through the early North American session and drop to a fresh daily low, around the 1.1500 psychological mark in the last hour.

The US dollar builds on last week's bounce from over a one-month low and gains traction for the third successive day, which, in turn, exerts downward pressure on the GBP/USD pair. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, climbs to a multi-day high and is drawing support from a combination of factors.

The Fed is universally expected to deliver another supersized 75 bps rate hike at the end of a two-day monetary policy meeting on Wednesday, which remains supportive of elevated US Treasury bond yields. This, along with the risk-off impulse - as depicted by a generally weaker tone around the equity markets, provides an additional boost to the safe-haven buck.

That said, growing speculations that the US central bank might soften its hawkish stance - amid signs of a slowdown in the US economy - could act as a headwind for the greenback. Investors might also refrain from placing aggressive bets ahead of this week's key central bank event risks and important US macro data scheduled at the beginning of a new month.

The Fed will announce its policy decision on Wednesday, which should play a key role in influencing the near-term USD price dynamics. This will be followed by the Bank of England meeting on Thursday. Apart from this, the closely-watched US jobs report - popularly known as NFP on Friday, will help determine the next leg of a directional move for the GBP/USD pair.

Technical levels to watch