GBP/USD trades with modest losses around 1.2400, focus remains on US CPI/FOMC minutes

• GBP/USD meets with a fresh supply on Wednesday, albeit lacks follow-through.
• A combination of factors acts as a tailwind for the USD and exerts some pressure.
• Traders now look to the US CPI, BoE Governor Bailey’s speech and FOMC minutes.

The GBP/USD pair attracts some selling following an intraday uptick to the 1.2445 area and reverses a part of the previous day's strong move up. Spot prices drop to a fresh daily low during the early part of the European session, with bears now awaiting a sustained break below the 1.2400 round-figure mark before placing fresh bets.

The prospects for further policy tightening by the Federal Reserve (Fed) put a floor under the US Treasury bond yields and act as a tailwind for the US Dollar (USD), which, in turn, is seen weighing on the GBP{/USD pair. In fact, markets have been pricing in a greater chance of another 25 bps rate hike at the next FOMC meeting in May. The bets were reaffirmed by the overnight hawkish comments by Philadelphia Fed Bank President Patrick Harker, saying that the US central bank is fully committed to bringing inflation back down to the 2% target.

The British Pound, on the other hand, is pressured by the recent mixed signals from the Bank of England (BoE) policymakers over the next move. Apart from this, looming recession risks seem to benefit the Greenback's relative safe-haven status and exert some downward pressure on the GBP/USD pair. That said, growing acceptance that the Fed is nearing the end of its rate-hiking cycles is holding back the USD bulls from placing aggressive bets ahead of the release of the latest US consumer inflation figures and the FOMC meeting minutes later this Wednesday.

Investors will look for clues about the Fed's future rate-hike path, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair. Apart from this, the BoE Governor Andrew Bailey's scheduled speech should contribute to producing short-term trading opportunities ahead of the UK GDP report on Thursday. Nevertheless, the aforementioned fundamental backdrop favours bearish traders and suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch