• GBPUSD is seen oscillating in a narrow trading band around the 1.1900 mark on Wednesday.
• The emergence of fresh USD selling and stronger UK CPI report continue to act as a tailwind.
• Traders now look forward to US Retail Sales and the BoE’s Monetary Policy Report Hearings.

The GBPUSD pair struggles to gain any meaningful traction on Wednesday and remains confined in a narrow trading band through the first half of the European session. The pair is currently trading around the 1.1900 mark and remains well below a nearly three-month high touched the previous day.

The downside, however, remains cushioned amid the emergence of fresh US Dollar selling, prompted by a slight improvement in the risk sentiment. According to the initial findings, the missile that hit Poland on Tuesday may have been fired by Ukraine at an incoming Russian missile. The headlines infuse some stability in the financial markets, which, in turn, undermines the safe-haven buck.

Apart from this, firming expectations for a less aggressive policy tightening by the Federal Reserve is seen as another factor weighing on the greenback. In fact, the markets are now pricing in over a 90% chance of a 50 bps rate hike at the December FOMC policy meeting. The bets were reaffirmed by Tuesday's release of the softer US Producer Price Index, which pointed to easing inflationary pressures.

The Sterling, on the other hand, draws support from hotter-than-expected UK consumer inflation figures. In fact, the headline UK CPI accelerated to the highest level since 1981 and came in at an 11.1% YoY rate in October, up from 10.1% recorded in the previous month. Adding to this, the core inflation (excluding volatile food and energy items) rose 6.5% YoY during the reported month.

The readings were higher than market estimates and adds to pressure on the Bank of England to continue raising borrowing costs. That said, growing worries about a deeper economic downturn hold back traders from placing aggressive bullish bets around the GBPUSD pair. Investors also seem reluctant and prefer to wait for the BoE's Monetary Policy Report Hearings later this Wednesday.

The lack of strong follow-through buying, meanwhile, warrants some caution before positioning for any further appreciating move. Market participants now look to the US monthly Retail Sales data, due for release during the early North American session. Apart from this, fresh geopolitical developments will influence the USD price dynamics and provide some impetus to the GBPUSD pair.

Technical levels to watch