GBP/USD retreats modestly, clings to strong gains near 1.2050

• GBP/USD consolidates its daily gains following earlier rally.
• Wall Street's main indexes remain on track to open in positive territory.
• Latest YouGov survey points to a decline in UK inflation expectations.

GBP/USD edged modestly lower after having reached a daily high of 1.2088 during the European trading hours. As of writing, the pair was still up 0.75% on the day at 1.2057.

The positive shift witnessed in risk sentiment earlier in the day caused the US Dollar to come under renewed selling pressure. Additionally, falling US Treasury bond yields put additional weight on the currency. The benchmark 10-year US Treasury bond yield, which fell more than 2% on Tuesday, stays in negative territory below 3.7%. 

Currently, US stock index futures are up between 0.4% and 0.8% on a daily basis, pointing to a positive opening in Wall Street's main indexes. 

Later in the session, the ISM's will release the December Manufacturing PMI report. The headline PMI is forecast to decline to 48.5 from 49 in December. Market participants will also pay close attention to the Prices Paid component of the survey, which will offer fresh insight into input inflation in the manufacturing sector. 

Finally, the Federal Reserve will publish the minutes of the December policy meeting at 1900 GMT. At the time of press, the CME Group's FedWatch Tool shows that markets are pricing in a 72.3% probability of a 25 basis points Fed rate hike in February. 

In the meantime, the latest monthly survey conducted by Citi and YouGov revealed that the British public's inflation expectations for 12 months ahead declined to 5.7% in December from 6.1% in the November's survey. 

Technical levels to watch for