GBP/USD struggles for a firm intraday direction, flat-lines above mid-1.2400s

• GBP/USD seesaws between tepid gains/minor losses through the early European session.
• A combination of factors acts as a headwind for the USD and lends support to the major.
• The uncertainty over the BoE’s rate-hike path holds back bulls from placing fresh bets.

The GBP/USD pair attracts some dip-buying near the 1.2435 region on Thursday and for now, seems to have stalled this week's modest pullback from its highest level since June 2022. Spot prices climb nearly 50 pips from the daily low, albeit lacks follow-through and trade in neutral territory, around the 1.2465 zone during the early part of the European session.

The US Dollar (USD) struggles to capitalize on the overnight bounce from over a two-month low and attracts fresh sellers on Wednesday, which, in turn, is seen lending some support to the GBP/USD pair. Rising bets for an imminent pause in the Federal Reserve's (Fed) rate-hiking cycle turn out to be a key factor acting as a headwind for the Greenback. In fact, the current market pricing indicates an even chance of a 25 bps lift-off at the next FOMC meeting in May and the possibility of rate cuts by year-end.

The bets were reaffirmed by the disappointing release of the US ADP report on Wednesday, which showed that private-sector employers added 145K jobs in March as compared to 200K anticipated and the previous month's upwardly revised reading of 261K. Adding to this, the ISM Services PMI indicated a slowdown in growth during March, along with a deceleration in its Employment sub-index. The data suggested that the Fed's efforts to cool the labor market could be having some impact.

Meanwhile, expectations that the Fed is nearly done with its inflation-fighting interest rate hikes keep the US Treasury bond yields depressed near their lowest level in seven months. This, along with a stable performance around the equity markets, undermines traditional safe-haven assets, including the buck. The GBP/USD pair, however, fails to attract any meaningful buying and lacks bullish conviction amid mixed signals from the Bank of England (BoE) policymakers over the future rate-hike path.

Traders also seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of the release of the closely-watched US monthly jobs data - popularly known as NFP - on Friday. In the meantime, traders on Thursday will take cues from the UK Construction PMI and the US Weekly Initial Jobless claims data. This, along with the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.

Technical levels to watch