GBP/USD remains confined in a range below 1.3600 mark amid stronger USD

• GBP/USD was seen consolidating its recent gains to the 1.3600 mark, or a near two-month high.
• Hawkish Fed expectations, elevated US bond yields revived the USD demand and capped gains.
• Receding Omicron fears, BoE rate hike bets acted as a tailwind for the sterling and the major.

The GBP/USD pair now seems to have entered a bullish consolidation phase and was seen oscillating in a range near the highest level since November 9, just below the 1.3600 mark.

A combination of diverging forces failed to assist the GBP/USD pair to capitalize on the recent up-trend witnessed over the past three weeks or so and led to subdued/range-bound price action on Monday. Hopes that the Omicron outbreak won't derail the UK economy and rising bets for additional rate hikes by the Bank of England continued underpinning the British pound. That said, a strong pickup in the US dollar demand kept a lid on any further gains for the major, at least for the time being.

As investors looked past Friday's mixed US monthly jobs report, the USD made a solid comeback on the first day of a new week and was supported by elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond climbed above the 1.80% threshold for the first time since January 2020. Moreover, the US 2-year notes, which are highly sensitive to rate hike expectations, also shot to a two-year high amid the prospects for an eventual Fed lift-off in March 2022.

Meanwhile, the mixed fundamental backdrop held back traders from placing fresh bullish bets around the GBP/USD pair amid absent relevant market-moving economic releases, either from the UK or the US. Hence, the US bond yields will continue to play a key role in influencing the USD price dynamics and provide some impetus to the major. This, in turn, makes it prudent to wait for a sustained strength beyond the 1.3600 mark before positioning for any further near-term appreciating move.

Technical levels to watch