GBP/USD sticks to modest intraday gains above 1.3100 mark, lacks follow-through

• GBP/USD edged higher for the second successive day amid a broad-based USD weakness.
• The risk-on impulse, retreating US bond yields continued weighing on the safe-haven buck.
• The fundamental backdrop warrants some caution before placing aggressive bullish bets.

The GBP/USD pair held on to its modest intraday gains through the early European session and was last seen trading just a few pips below the daily high, around the 1.3120-1.3125 region.

Following the previous day's good two-way price moves, the GBP/USD pair edged higher for the second successive day on Wednesday and was supported by broad-based US dollar weakness. The latest optimism over the possibility of a breakthrough in the Russia-Ukraine peace negotiations remained supportive of the prevalent risk-on mood. This, along with the ongoing retracement slide in the US Treasury bond yields, dragged the greenback over a one-week low in the last hour and extended some support to spot prices.

That said, expectations that the Fed would adopt a more aggressive policy stance and deliver a 50 bps rate hike at the next two meetings should act as a tailwind for the US bond yields. Conversely, the Bank of England had softened its language on the need for further rate hikes. This, in turn, should cap gains for the GBP/USD pair and warrants some caution before positioning for any meaningful recovery from a near two-week low, around mid-1.3000s set in the previous day.

There isn't any major market-moving economic data due for release from the UK, leaving the GBP/USD pair at the mercy of the USD price dynamics. Meanwhile, the US economic docket features the release of the ADP report on private-sector employment and the final Q4 GDP print. This, along with the US bond yields, will drive the USD demand. Apart from this, traders will take cues from fresh developments surrounding the Russia-Ukraine saga to grab some short-term opportunities.

Technical levels to watch