GBP/USD pulls back modestly but clings to strong gains near 1.2050

• GBP/USD consolidates its daily gains after the previous recovery.
• Wall Street’s main indices remain on track to open in positive territory.
• The latest YouGov survey points to a decline in inflation expectations in the UK.

The pair GBP/USD It dipped slightly after hitting a daily high of 1.2088 during European trading hours. At the time of writing these lines, the pair is up 0.75% and stands at 1.2057.

The positive turnaround in risk sentiment earlier in the day put the US dollar under further selling pressure. In addition, falling US Treasury yields weighed on the currency further. The benchmark 10-year US Treasury yield, which fell more than 2% on Tuesday, remains in negative territory below 3.7%.

Currently, US stock index futures are up between 0.4% and 0.8% on a daily basis, pointing to a positive open in the main Wall Street indices.

Later in the session, the ISM will report December’s manufacturing PMI. Headline PMI is forecast to decline to 48.5 from December 49. Market Participants will also pay close attention to the Prices Paid component of the survey, which will provide new data on input inflation in the manufacturing sector.

Finally, the Federal Reserve will release the minutes of the December policy meeting at 19:00 GMT. At press time, CME Group’s FedWatch tool showed markets pricing the probability of a 25 basis point Fed rate hike in February at 72.3%.

Meanwhile, the latest monthly survey by Citi and YouGov revealed that the British public’s inflation expectations for the next 12 months eased to 5.7% in December from 6.1% in the November survey.

Technical levels to consider