Ella 
In the Asian market on Tuesday, GBP/USD continued the correction trend from around 1.2500 points late in the previous day, fluctuating lower. GBP/USD is currently trading around the psychological 1.2500 mark, still near the three-month low hit last week.
The greenback attracted some bargain hunting and recouped some of its sharp losses overnight, halting a pullback slide to its highest levels since March, which in turn weighed on GBP/USD. A growing number of investors believe that the Federal Reserve (Fed) will maintain higher interest rates for longer, coupled with a generally cautious sentiment in the market, which seems to be beneficial to the safe-haven dollar.
It’s worth recalling that markets have been pricing in the possibility of the Fed raising interest rates by another 25 basis points before the end of the year. This expectation was reaffirmed by upbeat U.S. economic data released last week, which showed the resilience of the U.S. economy. Additionally, the Wall Street Journal reported over the weekend that some officials are still inclined to err on the side of raising rates too much on the grounds that they can cut rates later.
The Fed’s hawkish outlook remains supportive of rising U.S. bond yields and continues to fuel concerns about economic headwinds from rapidly rising borrowing costs. This in turn weakens the market’s preference for higher-risk assets, prompting some safe-haven funds to flow to the U.S. dollar. Nonetheless, hawkish comments from Bank of England (BOE) policymaker Catherine Mann on Monday may prevent GBP/USD from falling further.
Mann said it was too early for the Bank of England to stop raising interest rates and that the central bank would be better off not raising interest rates too high rather than stopping raising interest rates too early. This comes after Bank of England Governor Andrew Bailey warned last week that there may still be room for further rises in borrowing costs as inflation remains high. However, Bailey told lawmakers that the Bank of England was not far away from ending its streak of rate hikes.
Meanwhile, a mixed fundamental backdrop could prevent traders from making aggressive directional bets on GBP/USD ahead of the U.S. jobs report late in the European morning session. Market focus will then turn to monthly UK GDP data due on Wednesday, followed by crucial US consumer inflation data, which should provide some significant boost to GBP/USD.
