GBP/USD struggles near daily low, around 1.2000 mark amid modest USD strength

• GBP/USD comes under renewed selling pressure on Thursday amid a pickup in the USD demand.
• Recession fears weigh on investors’ sentiment and drive some haven flows towards the greenback.
• The Fed’s less hawkish outlook might keep a lid on the USD and limit deeper losses for the major.

The GBP/USD pair struggles to capitalize on the previous day's positive move and attracts fresh sellers near the 1.2075-1.2080 region on Thursday. The steady intraday descent drags spot prices to the 1.2000 psychological mark during the early part of the European session and is sponsored by the emergence of some buying around the US Dollar.

Despite the easing of strict COVID-19 restrictions in China, concerns about a deeper global economic downturn continue to weigh on investors' sentiment. This is evident from a fresh leg down in the US equity futures, which, in turn, is seen driving some haven flows towards the greenback and exerting downward pressure on the GBP/USD pair. That said, the prospects for smaller rate hikes by the Fed might hold back the USD bulls from placing aggressive bets and help limit losses for the major.

In fact, the minutes of the December FOMC policy meeting released on Wednesday showed that officials unanimously supported raising borrowing costs at a slower pace. The less hawkish outlook keeps the US Treasury bond yields depressed near a multi-week low, which could act as a headwind for the buck and lend some support to the GBP/USD pair. Traders might also prefer to move to the sidelines ahead of Friday's release of the closely-watched US monthly jobs report - popularly known as NFP.

In the meantime, Thursday's US economic docket, featuring the ADP report on private-sector employment, might provide some impetus to the GBP/USD pair later during the early North American session. This, along with the US bond yields and the broader risk sentiment, should influence the USD price dynamics and contribute to producing short-term opportunities heading into the key data risk.

Technical levels to watch