GBP/USD hangs near multi-day low, around mid-1.3100s ahead of Bailey’s speech

• Sustained USD buying dragged GBP/USD to a multi-day low on the first day of a new week.
• The Fed’s hawkish outlook, a softer risk tone continued underpinning the safe-haven buck.
• Investors now look forward to BoE’s Bailey remarks for some meaningful trading impetus.

The GBP/USD pair maintained its offered tone through the early European session and was last seen trading around mid-1.3100s, just a few pips above the multi-day low touched in the last hour.

The pair kicked off the new week on a weaker note and extended last week's retracement slide from the 1.3300 round-figure mark amid sustained US dollar buying interest. Growing acceptance that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation continued acting as a tailwind for the greenback.

In fact, the markets have been pricing in a 50 bps rate hike in the May meeting amid worries that the recent surge in commodity prices will put upward pressure on already elevated consumer prices. This, in turn, pushed the yield on the 10-year US government bond beyond the 2.5% threshold, or a fresh two-year and underpinned the buck.

Apart from this, the prevalent cautious mood was seen as another factor that benefitted the greenback's relative safe-haven status. The markets remained on the edge amid the lack of progress in the Russia-Ukraine peace negotiations. This, along with the imposition of fresh COVID-19 restrictions in China, weighed on investors' sentiment.

On the other hand, the British pound was weighed down by a dovish assessment of the Bank of England decision earlier this month. The GBP/USD pair, however, showed some resilience at lower levels as traders seemed reluctant to place aggressive bets ahead of the BoE Governor Andrew Bailey's speech later during the mid-European session.

Technical levels to watch