GBP/USD remains on the defensive below 1.3200 mark, not out of the woods yet

• GBP/USD witnessed some selling on Thursday and was pressured by a combination of factors.
• Reduced BoE rate hike bets, Brexit woes continued acting as a headwind for the British pound.
• A softer risk tone benefited the safe-haven greenback and also contributed to the selling bias.

The GBP/USD pair remained on the defensive heading into the North American session, albeit has managed to recover a few pips from the daily swing low. The pair was last seen trading just below the 1.3200 mark, still down over 0.20% for the day.

The pair struggled to capitalize on the overnight bounce from the 1.3160 area, or the lowest level since November 2020 and witnessed fresh selling on Thursday. The imposition of strict COVID-19 restrictions in the UK forced investors to scale back their bets for an imminent interest rate hike by the Bank of England. This, along with persistent Brexit-related uncertainties, continued acting as a headwind for the British pound.

On the other hand, the US dollar attracted fresh buying and reversed a part of the overnight profit-taking slide amid a generally weaker tone around the equity markets. Apart from this, hawkish Fed expectations further underpinned the greenback and exerted some downward pressure on the GBP/USD pair. The downside, however, remains cushioned as investors preferred to wait on the sidelines ahead of Friday's release of the US consumer inflation figures.

The markets have been pricing in the possibility for an eventual Fed liftoff in May 2022 amid worries about rising inflationary pressures. Hence, the US CPI report would influence the Fed's decision to taper its stimulus at a faster pace and set the stage for a rate hike. This, in turn, will drive the USD demand and provide a fresh impetus to the GBP/USD pair.

In the meantime, traders might take cues from Thursday's release of the US Weekly Initial Jobless Claims data. Apart from this, developments surrounding the coronavirus saga and the broader market risk sentiment would allow traders to grab some short-term opportunities around the GBP/USD pair.

Technical levels to watch