GBP/USD remains vulnerable below 1.3100 amid damp mood, ahead of Fed minutes

• GBP/USD remains vulnerable amid BOE/Fed policy divergence.
• Risk-aversion adds to the pain the GBP/USD pair on the Ukraine crisis.
• All eyes remain on the Fed minutes for fresh near-term direction.

GBP/USD is off the lows but remains modestly flat above 1.3050 in Wednesday's Asian trading, as bears take a breather after Tuesday’s one big figure sell-off.

Cable remained resilient so far this week before bulls gave into the bearish pressures on Tuesday, as the market sentiment took a big hit and smashed the risk-sensitive GBP alongside.

Investors’ confidence was sapped on mounting tensions over the global economic growth, in light of the fresh Western sanctions against Russia over its atrocities on the Ukrainian civilians.

Additionally, markets assessed the potential impact of the aggressive Fed’s tightening, as the policymakers at the world’s most powerful central bank suggest that the balance sheet reduction as well as, bigger rate increases could be well on the table in the upcoming May meeting.

The divergent monetary policy outlooks between the Fed and the BOE keep the pound undermined against the US dollar. The BOE policymakers remain in a tricky spot and refrain from committing any further rate rises, as they battle raging inflation amid increasing risks to economic growth.

Tuesday’s upward revision to the UK S&P Services PMI for March also failed to limit the downside in the pair. The S&P Global/CIPS UK Services PMI rose to 62.6 in March from 60.5 in February, an upward revision from a preliminary “flash” reading of 61.0.

Looking forward, all eyes will remain on the Fed March meeting’s minutes due later in the NA session for the pricing of the rate hike in May, as well as, fresh US dollar valuations.

GBP/USD: Technical levels