GBP/USD holds steady near mid-1.3800s, moves little post-UK macro data

• GBP/USD added to the overnight strong gains and gained traction for the second successive day.
• The risk-on impulse weighed on the safe-haven USD and extended some support to the major.
• Mostly disappointing UK macro data failed to impress bulls or provide any meaningful impetus.

The GBP/USD pair held on to its modest intraday gains near the 1.3840-50 region and moved little following the release of UK economic releases.

Following the previous day's modest pullback from weekly tops, the GBP/USD pair regained positive traction for the second consecutive day and was supported by a combination of factors. A goodish rebound in the equity markets was seen as a key factor that undermined demand for the safe-haven greenback. The British pound was further supported by hawkish comments from the Bank of England Governor Andrew Bailey's hawkish comments, saying that minimal conditions for an interest rate have been achieved.

The supporting factors, to a larger extent, were offset by unimpressive UK macro data, showing that the economic activity decelerated sharply in July. In fact, the monthly UK GDP print missed market expectations and posted a modest 0.1% growth during the reported month. Adding to this, the UK Manufacturing Production was broadly flat in July, though Industrial Production came in better than consensus estimates and rose 1.2% MoM. The GBP/USD pair, however, had a rather muted reaction to the mixed releases.

Meanwhile, firming expectations that the Fed will begin rolling back its pandemic-era stimulus should continue to act as a tailwind for the greenback and cap the upside for the GBP/USD pair. The speculations were further fueled by Fed Governor Michelle Bowman's hawkish comments, saying that the central bank was close to announcing the start of tapering. This, in turn, warrants caution for bullish traders and makes it prudent to wait for some follow-through buying before positioning for any further gains.

Market participants now look forward to the release of the US Producer Price Index for some impetus later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, could influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.

Technical levels to watch