GBP/USD holds steady above mid-1.2100s, upside potential seems limited

• GBP/USD ticks higher on Wednesday amid subdued USD demand, albeit lacks follow-through.
• A combination of factors acts as a headwind for USD and lends some support to the major.
• Expectations that the BoE might keep rates on hold in November cap the upside for the pair.

The GBP/USD pair attracts some dip-buying during the Asian session on Wednesday and for now, seems to have stalled the previous day's retracement slide from the vicinity of the 1.2300 mark, or a near two-week high. Spot prices manage to hold above the 1.2150 level in the wake of subdued US Dollar (USD) price action, though lack bullish conviction.

Retreating US Treasury bond yields, along with a generally positive risk tone, fail to assist the safe-haven Greenback to build on the previous day's solid rebound from over a one-month low, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. The downside for the USD, however, remains cushioned on the back of signs that the US economy remains resilient despite a surge in interest rates, which should allow the Federal Reserve (Fed) to stick to its rate-hiking cycle to tame inflation.

The flash version of the US PMIs released on Tuesday showed that business activity in the manufacturing sector moved out of contraction territory for the first time in six months, and services activity accelerated modestly amid signs of easing inflationary pressures. In contrast, the UK PMIs remained in the contraction zone for the third consecutive month, fueling speculations that the Bank of England (BoE) could maintain the status quo in November. This holds back bulls from placing aggressive bets around the GBP/USD pair.

Moving ahead, there isn't any relevant market-moving economic data due for release from the UK on Wednesday and the US economic docket only features the release of New Home Sales figures. Hence, investors will look to Fed Chair Jerome Powell's speech later during the US session for cues about the future rate-hike path, which, in turn, will drive the USD demand and provide some impetus to the GBP/USD pair. The focus, meanwhile, will remain on the US Core PCE Price Index - the Fed's preferred inflation gauge on Friday.

Technical levels to watch