GBPUSD drops to fresh daily low, eyes mid-1.1400s amid modest USD uptick

• GBPUSD comes under some selling pressure on Wednesday and snaps a three-day winning streak.
• Elevated US bond yields, a softer risk tone revives the USD demand and exerts downward pressure.
• The BoE’s gloomy outlook for the UK economy weighs on the Sterling and contributes to the slide.

The GBPUSD pair edges lower on Wednesday and moves further away from over a one-week high, around the 1.1600 round figure touched the previous day. The selling bias picks up pace during the first half of the European session and drags spot prices to a fresh daily low, around the 1.1470-1.1465 region in the last hour.

A combination of factors assists the US Dollar to stall its recent downfall to the lowest level since September 20, which, in turn, is seen acting as a headwind for the GBPUSD pair. Despite reduced bets for a more aggressive policy tightening by the Fed, the markets are still pricing in at least a 50 bps rate hike in December. This remains supportive of elevated US Treasury bond yields, which, along with the prevalent cautious market mood, offers some support to the safe-haven greenback.

The British Pound, on the other hand, continues to be undermined by the Bank of England’s bleak outlook for the UK economy. In fact, the UK central bank expects a recession to last for all of 2023 and the first half of 2024. The BoE last week also indicated a lower terminal peak than was priced into the markets. Apart from this, some cross-driven weakness stemming from an intraday pickup in the EURGBP pair weighs on the Sterling and contributes to the GBPUSD pair’s mildly offered tone.

Meanwhile, the latest leg down over the past hour or so could be attributed to some technical selling below the 1.1500 psychological mark. The GBPUSD pair, for now, seems to have stalled its recent bounce from levels just below mid-1.1100s and remains at the mercy of the USD price dynamics. In the absence of any relevant economic data, either from the UK or the US, traders on Wednesday will take cues from speeches by New York Fed President John Williams and Richmond Fed President Thomas Barkin.

Apart from this, the US bond yields, along with the broader risk sentiment will drive the USD demand and provide some impetus to the GBPUSD pair. The focus, however, will remain on the latest US consumer inflation figures on Thursday ahead of the Preliminary UK Q3 GDP report on Friday. The important macro releases will play role in determining the next leg of a directional move for the major.

Technical levels to watch