GBP/USD remains confined in a range below 1.2400, awaits FOMC/BoE meetings this week

• GBP/USD struggles to gain any meaningful traction and oscillates in a narrow band on Monday.
• Traders now seem reluctant to place fresh bets ahead of this week’s key central bank event risks.
• Bets for smaller Fed rate hikes continue to undermine the USD and lend some support to the pair.

The GBP/USD pair kicks off the new week on a subdued note and seesaws between tepid gains/minor losses through the early European session. The pair remains confined in a multi-day-old trading range and is currently placed just below the 1.2400 round-figure mark.

Traders now seem to have moved to the sidelines ahead of this week's central bank event risks, which, in turn, fails to provide any meaningful impetus to the GB/USD pair. The Federal Reserve is scheduled to announce its decision at the end of a two-day policy meeting on Wednesday. This will be followed by the latest monetary policy update by the Bank of England (BoE) on Thursday and will help determine the next leg of a directional move for the major.

In the meantime, speculations that elevated consumer inflation will force the Bank of England (BoE) to continue lifting rates offer some support to the British Pound. This, along with the underlying bearish sentiment surrounding the US Dollar, acts as a tailwind for the GBP/USD pair. In fact, the USD Index, which tracks the Greenback against a basket of currencies, languishes near a nine-month low amid bets for smaller rate hikes by the Fed.

Investors now seem convinced that the US central bank will soften its hawkish stance amid signs of easing inflationary pressures. The expectations were reaffirmed by Friday's release of the Fed's preferred inflation gauge - the Core PCE Price Index from the US, which fell to the 4.4% YoY rate in December from 4.7% previous. Other US macro data released recently, however, backed the case for the Fed to maintain its hawkish stance for longer.

Hence, investors will look for cues about the Fed's future rate hikes, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Heading into the key event risk, spot prices seem more likely to prolong the consolidative price move in the absence of any relevant market-moving economic releases, either from the UK or the US on Monday.

Technical levels to watch