GBP/USD refreshes daily top, retakes 1.2000 mark amid modest USD weakness

• GBP/USD regains some positive traction on Wednesday amid renewed USD selling bias.
• Bets for less aggressive Fed rate hikes and slugging US bond yields weigh on the buck.
• Bulls seem rather unaffected by dovish remarks from the BoE Chief Economist Huw Pill.
• Traders now look to US macro data for some impetus ahead of Fed Chair Powell’s speech.

The GBP/USD pair attracts some buying on Tuesday and maintains its bid tone through the first half of the European session. The pair is currently placed near the daily peak, with bulls now looking to build on the momentum beyond the 1.2000 psychological mark.

The US Dollar edges lower amid a softer tone surrounding the US Treasury bond yields and turns out to be a key factor offering some support to the GBP/USD pair. Growing acceptance that the Fed will slow the pace of its policy tightening and deliver a relatively smaller 50 bps rate hike in December act as a headwind for the US bond yields. Apart from this, signs of stability in the financial markets further seem to undermine the safe-haven greenback.

That said, uncertainty over the Chinese government's intention to scale back its strict zero-COVID policies, despite increasing public protests, continues to weigh on investors' sentiments. This, in turn, should lend some support to the buck ahead of Fed Chair Jerome Powell's speech later during the US session. Investors will look for fresh clues about the future rate hike path, which will play a key role in influencing the USD price dynamics.

In the meantime, the less hawkish remarks by Bank of England (BoE) Chief Economist Huw Pill could keep a lid on any further gains for the GBP/USD pair. Speaking at an online event, Pill said inflation is expected to fall rapidly in the 2nd half of 2023 and supply chain problems seem to be improving. Pill also pushed back against market expectations and sees a lower peak in the current tightening cycle. This, in turn, warrants caution for bullish traders.

Traders now look forward to the US economic docket, featuring the ADP report, Prelim Q3 GDP report and JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the GBP/USD pair.

Technical levels to watch