GBP/USD sticks to modest gains below mid-1.2700s, lacks bullish conviction

The GBP/USD pair attracts some buyers on the first day of a new week and sticks to its modest intraday gains, below mid-1.2700s through the Asian sess

Bets for further tightening by the BoE underpin the GBP and lend support to the major.The upside remains capped amid expectations for one more Fed rate hike move in 2023.attracts some buyers on the first day of a new week and sticks to its modest intraday gains, below mid-1.2700s through the Asian session.

, which, along with subdued US Dollar price action, is seen lending some support to the GBP/USD pair. In fact, the current market pricing indicates a more than 80% chance of a 25 bps lift-off at the next BoE meeting in September. The bets were lifted by the fact that British wages grew at a record pace in the second quarter, which added to worries about long-term inflation.

The Federal Reserve , on the other hand, is also expected to stick to its hawkish stance. In fact, the minutes of the July 25-26 FOMC meeting revealed that policymakers continued to prioritize the battle against inflation. This comes on the back of the US CPI report, which showed a moderate rise in consumer prices in July. Moreover, the US PPI climbed slightly more than expected and suggested that the battle to bring inflation back to the Fed's 2% target is far from being won.

The outlook, meanwhile, remains supportive of elevated US Treasury bond yields, which, along with a weaker risk tone, favours the USD bulls and should contribute to capping the GBP/USD pair. Against the backdrop of concerns about the worsening economic conditions in China, worries about headwinds stemming from rapidly rising borrowing costs fuel recession fears and weigh on investors' sentiment.

Moving ahead, there isn't any relevant market-moving economic data due for release on Monday, either from the UK or the US, leaving the GBP/USD pair at the mercy of the USD price dynamics. The market focus, meanwhile, will remain glued to the crucial Jackson Hole Symposium later

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