GBP/USD clings to gains above mid-1.3700s, focus remains on FOMC minutes

• GBP/USD staged a modest recovery from multi-week lows amid a subdued USD demand.
• COVID-19 jitters, risk-off mood and an uptick in the US bond yields helped limit USD losses.
• A combination of factors acted as a headwind for the GBP and capped gains for the major.

The GBP/USD pair edged higher through the mid-European session and climbed to fresh daily tops, around the 1.3765-70 region in the last hour.

Having found some support near the 1.3725 area, the GBP/USD pair gained some traction on Wednesday and recovered a part of the overnight slump to the lowest level since July 23. This marked the first day of a positive move in the previous three and was supported by a modest US dollar pullback from multi-month tops.

The incoming US economic data indicated that the US consumer has grown more cautious in response to the latest surge in COVID-19 cases. This forced investors to scale back their expectations for an early policy tightening by the Fed, which, in turn, was seen as a key factor that held the USD bulls on the defensive.

That said, a pickup in the US Treasury bond yields and the prevalent risk-off mood acted as a tailwind for the safe-haven greenback. Worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus, along with political tensions in Afghanistan continued weighing on investors' sentiment.

Apart from this, a combination of factors held investors from placing any aggressive bullish bets around the GBP/USD pair and capped gains. Worries that job losses in the UK will rise after the furlough scheme ends in September and Wednesday's softer UK consumer inflation figures for July could undermine the sterling.

Moreover, investors also preferred to wait on the sidelines ahead of the release of the FOMC meeting minutes. Market participants will look for clues on when the Fed will begin tapering its asset purchases, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the GBP/USD pair.

Technical levels to watch