GBP/USD remains depressed below mid-1.2600s amid modest USD strength

GBP/USD struggles to lure buyers on weaker UK retail sales and a modest USD uptick.

Expectations that the Fed will keep rates higher for a longer period underpin the buck.

Reduced bets for another BoE rate cut in December help limit the downside for the pair.

The GBP/USD pair remains on the defensive through the Asian session on Tuesday, albeit it lacks follow-through selling and currently trades just below mid-1.2600s. 

The British Retail Consortium (BRC) reported earlier today that sales volumes dropped by 3.3% in the 12 months to November. This marks the weakest reading since April and was significantly influenced by the timing of Black Friday sales. Nevertheless, the data still points to weakening consumer confidence and undermines the British Pound (GBP). This, along with a modest US Dollar (USD) uptick, is seen acting as a headwind for the GBP/USD pair. 

The USD Index (DXY), which tracks the Greenback against a basket of currencies, looks to build on the overnight bounce from a nearly three-week low amid bets that the Federal Reserve (Fed) will keep rates high for a longer period. Investors seem worried that US President-elect Donald Trump's tariff plans would trigger global trade wars. Moreover, Trump's expansionary policies could boost inflation and limit the scope for the Fed to ease its policy further.