GBP/USD refreshes daily low amid a pickup in USD demand, remains vulnerable

• GBP/USD retreats around 100 pips from the daily high amid resurgent USD demand.
• Fed Chair Jerome Powell reaffirms a 75 bps rate hike bets and boosts the greenback.
• The UK’s bleak economic outlook supports prospects for a further depreciating move.

The GBP/USD pair struggles to capitalize on its modest intraday uptick and attracts fresh selling near the 1.1560 area on Thursday. Spot prices refresh daily low, around the 1.1460 region during the early North American session and remain well within the striking distance of the lowest since 1985 touched the previous day.

Following a modest dip to a fresh weekly low, the US dollar regains positive traction and reverses a major part of the overnight retracement slide from a two-decade high. This turns out to be a key factor exerting downward pressure on the GBP/USD pair. Fed Chair Jerome Powell reiterated the central bank's strong commitment to bringing inflation down and reaffirmed expectations for a supersized rate hike at the September FOMC meeting.

In fact, the implied odds for a 75 bps now stands at 85%, which, in turn, pushes the US Treasury bond yields higher. Apart from this, a fresh leg down in the equity markets provides a goodish lift to the safe-haven greenback. Meanwhile, the optimism led by UK Prime Minister Liz Truss' announcement to cap energy bills for the next two years fades rather quickly amid the worsening UK economic outlook, which might continue to weigh on sterling.

The fundamental backdrop seems tilted firmly in favour of bearish traders and suggests that the path of least resistance for the GBP/USD pair is to the downside. That said, it will be prudent to wait for a sustained break below the 1.1400 round-figure mark before positioning for any extension of the recent downward trajectory witnessed over the past month or so.

Technical levels to watch