GBP/USD slides further below mid-1.2500s, fresh session low

• GBP/USD witnessed some selling for the second consecutive session on Wednesday.
• The emergence of some fresh USD buying seemed to exert some pressure on the pair.
• Fears of a second wave of COVID-19, geopolitical tensions benefitted the safe-haven USD.
• The downside is likely to remain cushioned ahead of the BoE policy decision on Thursday.

The GBP/USD pair broke down of its daily consolidative trading range and dropped to fresh session lows, around the 1.2525 region in the last hour.

The pair extended the previous day's rejection slide from the very important 200-day SMA and witnessed some selling for the second straight session on Wednesday. As investors digested the latest Brexit optimism, a sudden pick up in the US dollar demand turned out to be one of the key factors exerting pressure on the GBP/USD pair.

The global risk sentiment remained well supported by the Fed's announcement on Monday to start purchasing investment-grade US corporate bonds, report that the Trump administration was contemplating a $1 trillion infrastructure spending and a positive breakthrough in the fight against the coronavirus pandemic.

However, investors remain concerns about a sharp rise in new coronavirus cases in the US and the risk of a further escalation of geopolitical tensions in Asian. This, in turn, extended some support to the greenback's relative safe-haven status and led to the pair's sharp fall of around 40 pips over the past hour or so.

The downside, however, remained cushioned, at least for the time being, as investors might now refrain from placing aggressive bets ahead of the monetary policy update by the Bank of England on Thursday. Hence, it will be prudent to wait for some strong follow-through selling before positioning for any further depreciating move.

In the meantime, market participants will look forward to the release of the US housing market data – Building Permits and Housing Starts – for some impetus. This will be followed by the Fed Chair Jerome Powell's second day of testimony, which might influence the USD price dynamics and produce some short-term trading opportunities.

Technical levels to watch