GBP/USD remains confined in a range below 1.4200 mark post-UK CPI

The GBP/USD pair extended its sideways consolidative price action and remained confined in a range below the 1.4200 mark post-UK inflation figures.

Following the previous day's modest pullback from near three-month tops, the pair regained some traction on Wednesday amid the prevalent bearish sentiment surrounding the US dollar. Expectations that the Fed will keep interest rates low for a longer period continued acting as a headwind for the greenback and extended some support to the GBP/USD pair.

On the other hand, the British pound remained well supported by the upbeat outlook for the UK economic recovery from the pandemic, bolstered by the gradual easing of lockdown restrictions. The optimism was further fueled by the latest UK consumer inflation figures, which showed that the headline CPI rose 1.5% YoY in April as against 1.4% expected and 0.7% previous.

That said, a generally softer risk tone – as depicted by a modest pullback in the equity markets – helped limit the downside for the safe-haven USD and might cap gains for the GBP/USD pair. Investors also seemed reluctant to place any aggressive bullish bets, rather preferred to wait on the sidelines ahead of Wednesday's release of the FOMC meeting minutes.

Even from a technical perspective, the overnight strong positive move stalled near a resistance marked by the top end of over one-month-old ascending trend-channel. This further makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move towards retesting YTD tops, around the 1.4235 region touched in February.

Technical levels to watch