- GBP / USD is moving lower on Wednesday and back further from multi-year highs.
- Some buying around the USD is a key factor putting some pressure on the pair.
- UK CPI figures offer some support for the pair and help limit the decline.
The pair GBP/USD it is moving lower at the start of the European session on Wednesday and has had a rather subdued reaction to the release of UK consumer inflation figures.
The pair has seen some selling during the first half of trading action on Wednesday and has extended the pullback from the 34-month highs, around the 1.3950 region touched in the previous session. The fall is due to a some buying interest around the US dollar, which has been supported by the recent rally in US Treasury yields.
The market has been assessing the prospects for approval of the stimulus package of 1.9 trillion dollars proposed by US President Joe Biden. Reflation trading, in turn, has pushed the 10-year US government bond yield to the highest level since February 2020, around 1.30%, which has been seen as a key factor benefiting dollar demand.
Having said that, the drop remains limited amid optimism that the impressive rate of vaccination in the UK It would allow British Prime Minister Boris Johnson to lift restrictions on COVID-19 and get the economy moving. The British pound was also supported by Wednesday’s British CPI, more fertile than expected, which rose 0.7% in January from 0.6% the previous month.
Added to this, the monthly CPI reached -0.2% compared to the -0.4% expected and was mainly accompanied by the printing of the underlying CPI in line with market expectations. However, the data has done little to impress GBP bulls, although it has helped GBP / USD rally around 20 pips from daily lows. This, in turn, warrants some caution before positioning for any further bearish movement.
Market participants are now awaiting the US economic calendar, which highlights the release of monthly retail sales data. This, coupled with US bond yields and broader market risk sentiment, could influence USD price dynamics and generate some trading opportunities around GBP / USD.
GBP / USD technical levels
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