• GBP/USD seesawed between tepid gains/minor losses around the 1.3000 mark on Wednesday.
• Hot UK CPI report extended some support, though sustained USD buying interest capped gains.
• The Fed’s hawkish outlook, the Ukraine crisis continued underpinning the safe-haven greenback.

The GBP/USD pair witnessed good two-way price moves through the early North American session and for now, seems to have stabilized just above the 1.3000 psychological mark.

The pair did get a minor lift on Wednesday and touched an intraday high level of 1.3025 following the release of hotter-than-expected UK consumer inflation figures. The uptick, however, lacked bullish conviction amid the underlying bullish sentiment surrounding the US dollar and concerns about the potential economic fallout from the Ukraine crisis.

The USD prolonged its recent upward trajectory and shot to its highest level since May 2020 amid the prospects for a more aggressive policy tightening by the Fed. In fact, the markets seem convinced that the US central bank would hike interest rates at a faster pace to combat high inflation, which soared to the highest level since late 1981 last month.

Adding to this, the US Producer Price Inflation accelerated to 11.2% YoY in March, above expectations for a rise to 10.6% from 10.0% in February. The data indicated that there are pipeline costs that could put upward pressure on the already high consumer prices. This, in turn, remained supportive of elevated US Treasury bond yields and underpinned the buck.

Investors were also worried that the war in Ukraine could hit global growth, which was seen as another factor that benefitted the safe-haven greenback and acted as a headwind for the GBP/USD pair. That said, repeated failures to find acceptance below the 1.3000 mark warrants caution for aggressive bearish traders and positioning for any further depreciating move.

Nevertheless, the fundamental backdrop seems tilted firmly in favour of the USD bulls, suggesting that any attempted recovery move runs the risk of fizzling out rather quickly. The GBP/USD pair seems vulnerable to prolonging a three-week-old downtrend and aim to test the next relevant support near the 1.2900 round-figure mark.

Technical levels to watch