GBP/USD jumps back closer to 1.2100 mark, fresh daily peak amid notable USD supply

• GBP/USD regains positive traction and draws support from a combination of factors.
• The upbeat Chinese PMIs boost investors’ confidence and weigh heavily on the USD.
• The Brexit optimism, BoE rate hike bets benefit the GBP and lend additional support.

The GBP/USD pair attracts fresh buyers in the vicinity of the 1.2000 psychological mark on Wednesday and stalls the overnight rejection slide from the 50-day Simple Moving Average (SMA). The intraday positive move picks up pace during the early European session and lifts spot prices to a fresh daily high, around the 1.2085 region in the last hour.

The US Dollar retreats from a multi-week high touched on Tuesday, which, in turn, is seen as a key factor pushing the GBP/USD pair higher. The upbeat Chinese PMI prints for February fuel optimism that a recovery in the world's second-largest economy is gaining steam and boosts investors' confidence. This is evident from signs of stability around the equity markets and weighs heavily on the safe-haven Greenback.

The British Pound, on the other hand, draws additional support from the new UK-EU agreement on the Northern Ireland protocol, which eliminates the risk of a potential trade war between the two sides. Adding to this, rising bets for additional rate hikes by the Bank of England (BoE) lend some support to the GBP/USD pair. Some analysts, however, still hope that the UK central bank would pause the current tightening cycle.

In contrast, the Federal Reserve is universally expected to stick to its hawkish stance for longer in the wake of stubbornly high inflation. This remains supportive of elevated US Treasury bond yields and should act as a tailwind for the USD. Moreover, worries about economic headwinds stemming from rapidly rising borrowing costs should cap any optimism in the markets and contribute to limiting losses for the safe-haven buck.

Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the GBP/USD pair's solid bounce from a technically significant 200-day SMA. Traders now look to the final UK Manufacturing PMI, though the focus will remain on the BoE Governor Andrew Bailey's speech. Later during the early North American session, the US ISM Manufacturing PMI could influence the USD and provide some impetus.

Technical levels to watch