GBP/USD trades with modest losses, still comfortable above 1.3900 mark

• GBP/USD edged lower during the first half of the trading action on Wednesday.
• Fresh COVID-19 jitters benefitted the safe-haven USD and exerted some pressure.
• The British pound found some support following the release of UK inflation figures.

The GBP/USD pair traded with a mild negative bias through the early European session and was last seen hovering near daily lows, around the 1.3925-20 region.

The pair extended the previous day's retracement slide from multi-week tops – levels beyond the key 1.4000 psychological mark – and edged lower for the second consecutive session on Wednesday. The intraday downtick, however, stalled near the 1.3915 region following the release of UK consumer inflation figures, which showed that headline CPI rose 1.5% in March and 0.7% YoY.

The readings, however, was slightly lower than consensus estimates and held bullish traders from placing aggressive bets around the GBP/USD pair. This comes amid renewed fears about another dangerous wave of coronavirus infections in some countries, which continued lending some support to the safe-haven US dollar. This was seen as another factor that capped gains for the GBP/USD pair.

However, a combination of factors might keep a lid on any meaningful upside for the greenback and support prospects for the emergence of some dip-buying around the GBP/USD pair. Investors now seem convinced that the Fed will keep interest rates low for a longer period. This, along with the recent sharp decline in the US Treasury bond yields, should act as a headwind for the buck.

Hence, it will be prudent to wait for some strong follow-through selling before confirming that the GBP/USD pair has topped out in the near term. Bearish traders might wait for sustained weakness below the 1.3900 mark before positioning for any further depreciating move as the focus now shifts to a scheduled speech by the Bank of England Governor Andrew Bailey, later this Wednesday.

There isn't any major market-moving economic data due for release from the US. Hence, the broader market risk sentiment and the US bond yields will influence the USD price dynamics. This should play a key role in influencing the GBP/USD pair and allow traders to grab some short-term opportunities.

Technical levels to watch