• GBP/USD struggles to capitalize on hotter-than-expected UK CPI-led modest intraday gains.
• Hawkish Fed expectations continue to act as a tailwind for the USD and act as a headwind.
• The downside seems cushioned as traders seem reluctant ahead of the key FOMC minutes.

The GBP/USD pair retreats a few pips from the early European session high and is currently placed near the lower end of its daily trading range, just below the 1.2100 mark.

The British pound did get a minor boost after the UK Office for National Statistics reported that the headline CPI accelerated to the highest level since 1982 and rose 10.1% YoY in July. The reading was well above the 9.4% recorded in June and 9.8% estimated, lifting bets for another rate hike by the Bank of England. The GBP/USD pair, however, struggles to capitalize on the modest intraday uptick and meets with some selling in the vicinity of the 1.2200 round figure.

Growing recession fears might force the UK central bank to adopt a gradual approach to raising interest rates. This, along with the underlying bullish tone surrounding the US dollar, acts as a headwind for the GBP/USD pair. The USD stands tall near the monthly peak touched the previous day and continues to draw support from expectations that the Fed would stick to its policy tightening path. Apart from this, the cautious market mood further underpins the safe-haven buck.

That said, the USD bulls might refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the highly-anticipated FOMC minutes, due later during the US session. Investors would look for clues about the possibility of a 75 bps Fed rate hike move at the September policy meeting. This should influence the USD and provide a fresh directional impetus to the GBP/USD pair. In the meantime, the US Retail Sales figures might allow traders to grab short-term opportunities.

Hence, it would be prudent to wait for follow-through selling before confirming that the previous day's bounce from the 1.2000 psychological mark or the monthly low has run out of steam. That said, bulls are likely to wait for sustained strength beyond the 1.2200 round-figure mark before positioning for any further near-term appreciating move for the GBP/USD pair.

Technical levels to watch