Ella 
In the Asian market on Tuesday, GBP/USD continued to rise steadily after rebounding more than 80 points from the 1.2165-1.2160 area the day before. However, GBP/USD lacks bullish momentum, so investors will need to exercise caution before taking positions on an extension of GBP/USD’s recent rebound from the lowest levels since mid-March (around 1.2035 last week).
A number of factors have dragged the U.S. dollar (USD) to a fresh one-and-a-half-week low, which in turn has created a “tailwind” for the GBP/USD pair. The relatively sluggish U.S. wage growth data released last Friday eased market concerns about inflation and may make the Federal Reserve take a hawkish stance. In addition, Federal Reserve officials are cautious about the need for further interest rate increases, causing U.S. bond yields to fall further.
Meanwhile, initial market volatility over the military conflict between Israel and the Palestinian Islamist group Hamas proved short-lived after Federal Reserve officials turned slightly dovish. This is reflected in the generally positive stock market sentiment and further weakens the status of safe-haven currencies. That said, expectations that the Bank of England (BOE) will remain on hold in November should prevent any upside for the GBP/USD pair.
Indeed, the Bank of England unexpectedly paused its interest rate hike cycle in early September and has given little hint of its intention to raise rates. Therefore, it would be prudent to wait for strong follow-through buying in GBP/USD before confirming that a recent bottom has been formed in the GBP/USD pair and positioning for a clear move higher. Looking ahead, there are no important economic data releases from the UK or the US on Tuesday.
Later in the North American session, traders will take cues from speeches by key Fed members. Beyond this, broader U.S. bond yields and market risk sentiment could impact USD volatility, which should allow traders to seize short-term opportunities in GBP/USD trading. However, market focus will still be on the Federal Reserve meeting minutes and US consumer inflation data to be released on Wednesday and Thursday respectively.
