GBP/USD retreats from multi-week high amid modest USD uptick, bullish potential intact

• GBP/USD pulls back from its highest level since February touched earlier this Wednesday.
• A further rise in the US bond yields revives the USD demand and exerts some pressure.
• The fundamental backdrop supports prospects for additional near-term gains for the pair.

The GBP/USD pair retreats from the 1.2360 area, or its highest level since February 3 touched this Wednesday and trades with modest losses during the early North American session. Spot prices, for now, seem to have snapped a two-day winning streak, though manage to hold comfortably above the 1.2300 round-figure mark, or the daily swing low.

The US Dollar (USD) gains some positive traction amid a further rise in the US Treasury bond yields and is seen as a key factor acting as a headwind for the GBP/USD pair. Hopes that a full-blown banking crisis can be averted might have been averted fuel speculations that the Federal Reserve (Fed) might stick to its policy tightening path, which, in turn, continue to push the US bond yields higher. That said, the prevalent risk-on mood - as depicted by a generally positive tone around the equity markets - might hold back traders from placing aggressive bullish bets around the safe-haven Greenback.

In the absence of negative news from the banking sector over the past two weeks, the takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed market nerves about the contagion risk. US regulators reiterated strength in the banking system and helped reverse the recent negative sentiment in the markets. Furthermore, the Bank of England (BoE) Governor Andrew Bailey told the House of Commons Treasury Select Committee on Tuesday that the UK banking system is in a strong position and is not experiencing stress linked to the global turmoil in the banking sector.

Apart from this, bets for additional rate hikes by the BoE continue to act as a tailwind for the British Pound. The expectations were reaffirmed after the British Retail Consortium (BRC) reported that UK shop prices increased from 8.4% previously to 8.9% in the year to March - the highest reading on record since the survey started in 2005. Adding to this, food prices increased 15.0% over the year, also a record high. This, in turn, supports prospects for a further near-term appreciating move for the GBP/USD pair, warranting some caution before positioning for any meaningful corrective pullback.

Technical levels to watch