GBP/USD erases Tuesday's gains, trades around 1.2920

• US Dollar Index rebounds above 99 on Wednesday.
• EU's Bariner says EU is ready to offer "super preferential" access to EU markets.
• Investors are doubtful that new budget will stimulate UK economy. 

The GBP/USD pair failed to break above the 1.30 handle lost its traction on Wednesday to erase all the gains it recorded on Tuesday. As of writing, the pair was trading at 1.2925, losing 0.6% on a daily basis.

The broad-based USD strength on Wednesday weighed on the pair. With the 10-year US Treasury bond yield rebounding sharply from the all-time lows, the US Dollar Index (DXY) rose above the 99 handle during the European trading hours. Although the US T-bond yields turned south, once again, in the second half of the day, the DXY continues to float above 99 and looks to snap its three-day losing streak.

Uncertainty surrounding UK budget

On the other hand, investors seem to be doubting that the new UK budget will be able to ramp up government spending to stimulate the economy as initially anticipated after Rishi Sunak was appointed as the new Finance Minister. 

The Institute for Fiscal Studies, an economic research institute based in London, warned that the UK would need to raise taxes to fund the increase in government spending. 

Meanwhile, European Union’s Chief Negotiator Barnier on Wednesday said that the EU was ready to offer the UK a "super preferential" access to the EU markets but added that the EU cannot give the market access to the UK without strong fair competition guarantees.

There won't be any macroeconomic data releases from the UK on Thursday and investors will keep a close eye on the political developments. Later in the day, weekly Jobless Claims, Durable Goods Orders and fourth-quarter GDP data from the US will be looked upon for fresh impetus.

Technical levels to watch for