GBP/USD holds steady around 1.2300, just below monthly top amid broad-based USD weakness

• GBP/USD scales higher for the second straight day and climbs back closer to the monthly peak.
• The Fed’s less hawkish outlook, easing fears of a banking crisis weigh on the USD and lend support.
• Rallying US bond yields could limit losses for the USD and cap any meaningful upside for the pair.

The GBP/USD pair builds on the previous day's positive move and gains some follow-through traction for the second successive day on Tuesday. The momentum pushes spot prices to the 1.2330 region, back closer to the monthly peak touched last week and is sponsored by the prevalent selling bias surrounding the US Dollar (USD).

Against the backdrop of the Federal Reserve's less hawkish outlook, receding fears of a full-blown banking crisis turn out to be a key factor weighing on the safe-haven Greenback and lending support to the GBP/USD pair. It is worth recalling that the Fed last week toned down its aggressive approach to reining in inflation and signalled that a pause to interest rate hikes was on the horizon. Furthermore, the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company helped calm market nerves about the contagion risk and reverse the recent negative sentiment.

The British Pound, on the other hand, draws support from the fact that the Bank of Governor Andrew Bailey, in his speech last night, stressed that interest rates may have to move higher if there were signs of persistent inflationary pressure. This turns out to be another factor acting as a tailwind for the GBP/USD pair. That said, the ongoing rally in the US Treasury bond yields limits losses for the buck and caps the major, making it prudent to wait for some follow-through buying beyond the 1.2340-1.2345 area, or the monthly peak before placing fresh bullish bets.

Nevertheless, the fundamental backdrop supports prospects for a further near-term appreciating move, suggesting that any pullback might be seen as a buying opportunity and is more likely to remain limited. Next on tap is the US macro data - the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. Traders will further take cues from the US bond yields, which, along with the broader risk sentiment, might influence the USD price dynamics and produce short-term opportunities around the GBP/USD pair.

Technical levels to watch