GBP/USD surrenders intraday gains, back below 1.2300 mark amid modest USD uptick

• GBP/USD struggles to capitalize on its modest intraday gains amid a modest USD bounce.
• The ongoing rally in the US bond yields is seen as a key factor lending support to the buck.
• The Fed’s less hawkish outlook and a positive risk tone might keep a lid on the Greenback.
• The prospects for additional rate hikes by the BoE should extend some support to the pair.

The GBP/USD pair attracts some sellers following an early uptick to the 1.2330 region on Tuesday and retreats to the lower end of its daily trading range during the first half of the European session. The pair is currently placed just below the 1.2300 round-figure mark, nearing unchanged for the day, and remains at the mercy of the US Dollar (USD) price dynamics.

Easing fears of a full-blown banking crisis continues to push the US Treasury bond yields higher, which, in turn, assist the buck to recover its modest intraday losses to a two-day low. That said, the Federal Reserve's signal last week that it might soon pause the rate-hiking cycle, along with a positive risk tone, could cap the upside for the safe-haven Greenback and lend support to the GBP/USD pair.

The global risk sentiment remains supported by fading worries about the contagion risk from the recent turmoil in the banking sector, especially after the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company. Adding to this, regulators have reassured that they stood ready to address any liquidity shortfalls and further boosted investors' appetite for perceived riskier assets.

The British Pound, on the other hand, could draw support from the overnight remarks by the Bank of Governor Andrew Bailey, saying that inflation remained the main driver of monetary policy decisions. During a speech at the London School of Economics, Bailey signalled that the central bank is ready to deliver more monetary tightening if signs of persistent inflationary pressures become more evident.

The aforementioned fundamental backdrop suggests that the path of least resistance for the GBP./USD pair is to the upside and any subsequent pullback might still be seen as a buying opportunity. That said, bulls might wait for some follow-through buying beyond the monthly top, around the 1.2340-1.2345 area touched last week, before positioning for any meaningful gains.

There isn't any major market-moving macro data due from the UK on Tuesday, while the US economic docket features the Conference Board's Consumer Confidence Index and the Richmond Manufacturing Index. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term opportunities around the GBP/USD pair.

Technical levels to watch