GBP/USD struggles for direction, stuck in a range around 1.3825-30 region

• GBP/USD was seen consolidating the overnight sharp retracement slide from two-week tops.
• A modest uptick in the US bond yields underpinned the USD and capped any meaningful gains.
• Investors look forward to the UK Services PMI for some impetus ahead of the FOMC minutes.

The GBP/USD pair lacked any firm directional bias and seesawed between tepid gains/minor losses through the Asian session. The pair was last seen hovering around the 1.3825 region, just above the weekly lows touched in the previous day.

The pair witnessed a dramatic intraday turnaround on Tuesday and dropped nearly 120 pips from over two-week tops, albeit managed to find some support near the 1.3800 mark. The sharp fall lacked any obvious fundamental catalyst and was exclusively sponsored by some cross-driven weakness stemming from a solid short-covering bounce in the EUR/GBP cross.

However, the gradual reopening of the UK economy – amid the highly successful vaccination distribution program – helped limit any further losses for the British pound. In fact, UK Prime Minister Boris Johnson announced the second phase of lockdown easing on Monday and confirmed that nonessential stores will be allowed to reopen from April 12.

On the other hand, a modest uptick in the US Treasury bond yields helped the US dollar to stall its recent pullback from four-month tops. This, in turn, kept a lid on any meaningful upside for the GBP/USD pair. Investors also seemed reluctant to place any aggressive bets ahead of Wednesday's release of the latest FOMC meeting minutes.

Investors remain optimistic about the prospects for a relatively faster US economic recovery from the pandemic, thanks to the impressive pace of coronavirus vaccinations. This, along with US President Joe Biden's infrastructure spending plan of more than $2 trillion, has been fueling speculations about an uptick in US inflation.

This, in turn, raised doubts that the Fed will retain ultra-low interest rates for a longer period. Hence, the minutes will be closely scrutinized for clues if the conditions to begin tightening were discussed. This would play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.

In the meantime, the final version of the UK Services PMI will be looked upon for some short-term trading opportunities. There isn't any major market-moving economic data due for release from the US, leaving the USD at the mercy of the US bond yields.

Technical levels to watch