GBP/USD remains depressed near mid-1.2100s amid modest USD strength, ahead of Fed’s Powell

• GBP/USD struggles to capitalize on its gains recorded over the past two-trading sessions.
• A combination of factors helps revive the USD demand and exerts pressure on the major.
• Traders now look to Fed Chair Jerome Powell’s speech for some meaningful opportunities.

The GBP/USD pair edges lower on Tuesday and snaps a two-day winning streak to a nearly three-week high touched the previous day. The pair remains on the defensive through the first half of the European session and is currently flirting with the daily low, around mid-1.2100s.

A combination of factors assists the US Dollar to stage a modest recovery from a seven-month low set on Monday, which, in turn, is seen exerting some downward pressure on the GBP/USD pair. A goodish pickup in the US Treasury bond yields, along with a softer risk tone, help revive demand for the safe-haven greenback.

Worries that the massive flow of Chinese travellers may cause another surge in infections overshadow the optimism led by China's pivot away from its strict zero-COVID policy. Furthermore, the protracted Russia-Ukraine war has been fueling concerns about a deeper global economic downturn and weighing on investors' sentiment.

Apart the USD uptick could also be attributed to some repositioning trade ahead of Fed Chair Jerome Powell's speech, due later during the early North American session. Investors will look for more clarity on the Fed's rate hike path, which will play a key role in influencing the USD and provide a fresh impetus to the GBP/USD pair.

The British Pound, on the other hand, is undermined by a bleak outlook for the UK economy, which has been fueling expectations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. This, in turn, supports prospects for a further intraday fall for the GBP/USD pair amid absent relevant macro releases.

Technical levels to watch