GBP/USD consolidates in a range around 1.3530-35 region, US data/FOMC minutes awaited

• GBP/USD edged higher on Wednesday amid subdued USD demand, though lacked bullish conviction.
• A softer risk tone acted as a tailwind for the safe-haven USD and kept a lid on any meaningful gains.
• The worsening COVID-19 situation in the UK capped the upside ahead of the US data/FOMC minutes.

The GBP/USD pair now seems to have entered a bullish consolidation phase and was seen oscillating in a range, around the 1.3530-40 region through the early European session.

Following the previous day's modest pullback from the 100-day SMA, around the 1.3555-60 region, the GBP/USD pair regained some positive traction on Wednesday amid subdued US dollar demand. Retreating US Treasury bond yields turned out to be a key factor that kept the USD bulls on the defensive through the first half of the trading.

The British pound was further underpinned by hopes that the Omicron outbreak won't derail the UK economy and rising bets for a further policy tightening by the Bank of England. That said, the worsening COVID-19 situation in the United Kingdom might hold back traders from placing aggressive bullish bets around the sterling.

In fact, Britain reported 218,724 coronavirus cases on Tuesday – the highest daily total since the pandemic began – amid the alarming spread of the highly transmissible Omicron strain. The UK Prime Minister Boris Johnson, however, had suggested that there would be no further tightening of measures soon to contain the outbreak.

Meanwhile, a generally weaker tone around the equity markets, along with speculations for a faster policy tightening by the Fed acted as a tailwind for the greenback. This might further contribute to capping any meaningful gains for the GBP/USD pair. Investors might also be reluctant ahead of Wednesday's release of the FOMC minutes.

Heading into the key event risk, traders will take cues from the US economic docket – featuring the ADP report on private-sector employment, Building Permits and the final Services PMI. This, along with the US bond yields and the broader market risk sentiment, might influence the USD and provide some impetus to the GBP/USD pair.

Technical levels to watch