GBP/USD on the defensive below mid-1.2800s ahead of Powell

• UK political uncertainty, softer UK CPI held the GBP bulls on the defensive.
• Sliding US bond yields weighed on the USD and helped limit the downside.
• Investors look forward to Powell’s testimony for some short-term impetus.

The GBP/USD pair lacked any firm directional bias and remained confined in a narrow trading band below mid-1.2800s through the early North-American session on Wednesday.
 
The pair extended its sideways consolidative price action for the second consecutive session as investors remained on the sidelines, awaiting a fresh catalyst before positioning for the next leg of a directional move.

Traders refrained from placing any directional bets

Given the uncertainty surrounding the outcome of the UK snap election in December, though is biased towards a majority for Conservatives, investors seemed reluctant to place any aggressive bets.
 
It is worth recalling that the Brexit party leader – Nigel Farage on Tuesday refused to make additional concessions apart from the decision to not challenge any of the 317 seats currently held by the Conservatives.
 
The British Pound was further weighed down by Wednesday's softer UK consumer inflation figures, which eased more than expected to 1.5% YoY rate in October and raised odds of BoE easing in the coming months.
 
On the other hand, the US Dollar failed to capitalize on its intraday positive move amid a sharp turnaround in the US Treasury bond yields and was seen as one of the key factors lending some support to the major.
 
Meanwhile, the USD bulls seemed rather unimpressed by the latest US CPI print for October as the key focus remains on the Fed Chair Jerome Powell's testimony, scheduled later during the US trading session.

Technical levels to watch