GBP/USD trades with modest losses near daily low, eyeing 1.3400 mark

• GBP/USD edged lower for the second successive day on Wednesday.
• The worsening COVID-19 situation in the UK weighed on the sterling.
• A modest USD strength also contributed to the intraday selling bias.

The GBP/USD pair witnessed some selling during the early European session and dropped to a fresh daily low, around the 1.3415 region in the last hour.

Despite easing concerns over the fast-spreading Omicron variant, investors remain concerned about the economic impact of the continuous surge in new COVID-19 cases. This, in turn, assisted the safe-haven US dollar to gain some positive traction for the second successive day and acted as a headwind for the GBP/USD pair through the first half of the trading on Wednesday.

The British pound was further undermined by the fact that Britain reported a record 129,471 new cases on Tuesday, which could force the government to impose fresh restrictions. It is worth recalling that the UK Prime Minister Boris Johnson had said last week that ministers would keep the latest data under constant review to see if stricter measures are needed.

That said, a generally positive tone around the equity markets could hold back the USD bulls from placing aggressive bets and extend some support to the GBP/USD pair. This makes it prudent to wait for a strong follow-through selling before confirming that the pair has topped out and positioning for a deeper corrective slide from over one-month high touched on Tuesday.

 In the absence of any major market-moving economic releases from the UK, the USD price dynamics will continue to play a key role in influencing the pair's intraday movement on Wednesday. The second-tier US macro data – November Goods Trade Balance, Wholesale Inventories and Pending Home Sales – might also do little to provide any impetus to the GBP/USD pair.

Technical levels to watch