GBP/USD retreats to 1.2050 in quiet session

• GBP/USD came under modest bearish pressure on Monday.
• Trading action is likely to remain subdued during the American trading hours.
• US economic docket will feature several key data releases later in the week.

GBP/USD stretched lower to the 1.2050 area in the early European morning after having spent the Asian session moving sideways in a very tight range slightly below 1.2100.

Markets seem to have turned cautious on the first trading day of 2023 but trading volumes remain thin with the observance of the New Year holiday in major economies. Investors grow increasingly concerned over the impact of the surging number of coronavirus cases in China on the global economic activity as the country stays on the reopening path.

Additionally, the data from China over the weekend revealed that NBS Manufacturing PMI and the Non-Manufacturing PMI declined to 47 and 41.6 in December, respectively, pointing to a contraction in business activity ay an accelerating pace.

The FOMC will publish the minutes of its December meeting on Wednesday and investors will look for fresh clues regarding the Fed's near-term policy outlook.

The ISM Manufacturing and Services PMI surveys, the ADP's private sector employment report and December Nonfarm Payrolls data will also be featured in the US economic docket later in the week.

In the absence of high-impact macroeconomic data releases from the UK, the USD's market valuation and reaction to the high-tier events should continue to drive GBP/USD's action.

Technical levels to watch for