GBP/USD climbs to fresh weekly top, around 1.2100 mark amid notable USD supply

The GBP/USD pair builds on the overnight bounce from the vicinity of the 200-day SMA support and gains some follow-through traction for the second straight day on Wednesday. Spot prices climb to a fresh weekly high during the early part of the European session, with bulls now looking to extend the momentum further beyond the 1.2100 round-figure mark.

The US Dollar comes under some renewed selling pressure amid a modest downtick in the US Treasury bond yields and turns out to be a key factor acting as a tailwind for the GBP/USD pair. Fed Chair Jerome Powell failed to offer fresh hawkish signals on Tuesday and reiterated that the process of disinflation was underway. This, in turn, raises hopes that interest rates may not rise much further, which, in turn, exerts some downward pressure on the US bond yields and undermines the Greenback.

That said, a generally weaker risk tone helps limit losses for the safe-haven buck and keeps a lid on any further upside for the GBP/USD pair, at least for the time being. The market sentiment remains fragile amid worries about economic headwinds stemming from the continuous rise in borrowing costs, the latest COVID-19 outbreak in China and the protracted Russia-Ukraine war. Apart from this, fears about worsening US-China relations temper investors' appetite for perceived riskier assets.

Apart from this, a dovish assessment of the Bank of England (BoE) decision last week also contributes to capping the GBP/USD pair. In fact, the UK central bank removed the phrase that they would "respond forcefully, as necessary". Furthermore, BoE Governor Andrew Bailey said that inflation will fall more rapidly during the second half of 2023. This raises speculations that the current rate-hiking cycle might be nearing the end and might hold back bulls from placing aggressive bets.

There isn't any major market-moving economic data due for release on Wednesday, either from the UK or the US, leaving the GBP/USD pair at the mercy of the USD price dynamics. Hence, traders now look forward to speeches by influential FOMC members. This, along with the US bond yields and the broader risk sentiment, should drive the USD demand and provide some impetus to the GBP/USD pair. The focus will then shift to the BoE's Monetary Policy Report Hearings on Thursday.

Technical levels to watch