The GBP/USD pair maintained its offered tone through the early European session and had a rather muted reaction to the release of UK consumer inflation figures. The pair witnessed some selling during the first half of the trading action on Wednesday and retreated further 34-month tops, around mid-1.3900s touched in the previous session. The downtick was sponsored by some follow-through US dollar buying interest, which remained well supported by the recent runaway rally in the US Treasury bond yields.
The market has been pricing in the prospects for the passage of the US President Joe Biden's proposed $1.9 trillion stimulus package. The reflation trade, in turn, pushed the yield on the benchmark 10-year US government bond to the highest level since February 2020, around 1.30% and was seen as a key factor that underpinned the greenback demand.