GBP/USD consolidates in a range above mid-1.2100s, seems vulnerable amid modest USD strength

• GBP/USD lacks any firm intraday directional bias and remains confined in a narrow trading band.
• The Fed’s hawkish outlook, rising US bond yields revive the USD demand and act as a headwind.
• The fundamental backdrop favours bearish traders and supports prospects for a further decline.

The GBP/USD pair continues with its struggle to gain any meaningful traction and remains confined in a range through the early European session on Wednesday. The pair is currently placed just above the 1.2150 area, well within the striking distance of a two-and-half-week low touched on Tuesday.

Following the overnight sharp fall, the US Dollar regains some positive traction and turns out to be a key factor acting as a headwind for the GBP/USD pair. The Bank of Japan's policy tweak, which triggered a sell-off in bond markets, along with the Federal Reserve's more hawkish outlook, continues to push the US Treasury bond yields higher. This, in turn, is seen as lending some support to the greenback.

The British Pound, on the other hand, is undermined by a dovish outcome from the Bank of England (BoE) meeting last week. In fact, two out of nine BoE MPC members voted to keep interest rates unchanged, suggesting that the central bank is closer to ending the current policy tightening cycle. This further contributes to capping the upside for the GBP/USD pair and supports prospects for deeper losses.

That said, a goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - keeps a lid on any meaningful upside for the safe-haven buck. This, in turn, is holding back traders from placing aggressive bearish bets around the GBP/USD pair and lending some support, at least for the time being, in the absence of any relevant market-moving macro releases from the UK.

The US economic docket, meanwhile, features the Conference Board's Consumer Confidence Index, due later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and provide some impetus to the GBP/USD pair. The focus will then shift to the release of the final Q3 GDP prints from the UK and the US on Thursday.

Technical levels to watch