GBP/USD slides to nearly three-week low, eyes mid-1.2600s amid modest USD strength

• GBP/USD adds to the overnight losses and drops t a nearly three-week low on Friday.
• The USD remains well supported by Thursday's upbeat macro data and exerts pressure.
• A sustained break below a two-month-old ascending trend-line favours bearish traders.

The GBP/USD pair remains depressed for the second successive day on Friday and touches a nearly three-week low, around the 1.2765 region during the Asian session.

The US Dollar (USD) builds on the previous day's strong rally from a one-week low and climbs to its highest level since July 10, which, in turn, is seen as a key factor exerting some pressure on the GBP/USD pair. Thursday's upbeat US macro data pointed to an extremely resilient US economy and increased the likelihood that the Federal Reserve (Fed) could further hike interest rates. The US Commerce Department reported that the world's largest economy expanded by 2.4% annualized pace during the April-June quarter, beating expectations. Adding to this, the Initial Jobless Claims unexpectedly fell to 221K in the week ended July 22.

This comes after Fed Chair Jerome Powell left the door open for one more 25 bps rate-hike in September or November by saying that the economy still needs to slow and the labour market to weaken for inflation to credibly return to the 2% target. The outlook remains supportive of a further rise in the US Treasury bond yields. In fact, the yield on the yield on the benchmark 10-year US government bond climbs back above the 4.0% threshold, which, along with a slight deterioration in the global risk sentiment, benefits the Greenback's relative safe-haven stats and contributes to the selling bias surrounding the GBP/USD pair.

Friday's downfall, meanwhile, could further be attributed to some technical selling following the overnight sustained break and close below a two-month-old ascending trend-line support. Apart from this, diminishing odds for aggressive rate hikes by the Bank of England (BoE), especially after the softer UK consumer inflation figures released last week, suggests that the path of least resistance for the GBP/USD pair is to the downside. Market participants now look forward to the release of the US Core PCE Price Index - the Fed's preferred inflation gauge - for some meaningful impetus later during the early North American session.

Technical level to watch