GBP/USD hangs near daily low, around mid-1.2100s amid reviving USD demand

• GBP/USD struggles to capitalize on the overnight positive move amid a modest USD strength.
• Expectations that the BoE is done raising interest rates contribute to the intraday downtick.
• The downside seems cushioned ahead of the FOMC on Wednesday and the BoE on Thursday.

The GBP/USD pair edges lower during the Asian session on Tuesday and reverses a part of the previous day's goodish move up of over 85 pips from sub-1.2100 levels. Spot prices currently trade around the 1.2155 region, down just over 0.10% for the day and well within a familiar range held over the past week or so.

Traders seem reluctant to place aggressive directional bets and prefer to wait on the sidelines ahead of this week's key central bank event risks - the FOMC policy decision on Wednesday, followed by the Bank of England (BoE) meeting on Thursday. In the meantime, expectations that the Federal Reserve (Fed) will stick to its hawkish stance remain supportive of elevated US Treasury bond yields and help revive the US Dollar (USD) demand, which, in turn, is seen exerting some pressure on the GBP/USD pair.

The US economic resilience, along with still sticky inflation, gives the Fed headroom to keep interest rates higher for longer. In fact, the markets are still pricing in the possibility of one more rate hike by the end of this year. In contrast, the BoE is expected to leave its benchmark interest rate on hold at a 15-year high of 5.25% for the second successive time to support the ailing economy. This, in turn, favours bearish traders and suggests that the path of least resistance for the GBP/USD pair is to the downside.

Moving ahead, there isn't any relevant market-moving economic data due for release from the UK, leaving spot prices at the mercy of the USD price dynamics. Later during the early North American session, traders will take cues from the US economic docket, featuring the Chicago PMI and the Conference Board's Consumer Confindence Index. Apart from this, the US bond yields will drive the USD demand and contribute to producing short-term trading opportunities around the GBP/USD pair.

Technical levels to watch