The GBP/USD pair extends its overnight retreat from a multi-day high, near the mid-1.2700s, and continues to lose territory throughout Wednesday's Asian session. Spot prices retreated below the 1.2700 round-number level and remain within striking distance of the 100-day Simple Moving Average (SMA) support near the 1.2620-1.2615 region, or the lowest level since Monday, June 30.

The underlying bullish sentiment surrounding the US Dollar (USD), bolstered by expectations that the Federal Reserve (Fed) will maintain its hawkish posture, turns out to be a significant factor exerting some downward pressure on the GBP/USD exchange rate. The optimistic US Retail Sales data published on Tuesday indicated that consumer spending held up well in July, reinforcing investors' conviction that the US central bank will maintain higher interest rates for a longer period of time.

However, an August decline of 20 points in the Empire State Manufacturing Index to -19 reaffirms market expectations that the Fed will halt its rate-hiking cycle at its September meeting. This, in turn, prevents USD investors from placing new wagers and may provide support for the GBP/USD pair. Traders also appear hesitant and prefer to await the publication of the FOMC meeting minutes, which may provide fresh hints regarding the future rate-hike trajectory.

Prior to the main event risk, traders will look to the US economic calendar, which includes the Building Permits, Housing Starts, and Industrial Production releases. In the interim, robust wage growth data, which added to concerns about long-term inflation and could force the Bank of England (BoE) to increase interest rates further, should help limit losses for the GBP/USD pair. This calls for prudence before positioning for a further intraday decline.

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