• GBP/USD gains some positive traction on Monday, albeit lacks follow-through buying.
• Bets for further tightening by the BoE underpin the GBP and lend support to the major.
• Subdued USD price action also contributes to the mildly bid tone surrounding the pair.
• The upside remains capped amid expectations for one more Fed rate hike move in 2023.

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 session. Spot prices, however, remain confined in a familiar trading band held over the past three weeks or so and the mixed fundamental backdrop warrants some caution before placing aggressive bullish bets.

The British Pound (GBP) continues to draw support from rising bets for further interest rate hikes by the Bank of England (BoE), which, along with subdued US Dollar (USD) 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. This, along with the upbeat UK GDP report and slightly higher-than-expected UK CPI print, supports prospects for a further BoE policy tightening.

The Federal Reserve (Fed), 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. Adding to this, the incoming US macro data continues to point to an extremely resilient economy and keeps the door for one more 25 bps rate hike by the end of this year wide open.

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. This, in turn, makes it prudent to wait for strong follow-through buying before traders start positioning for an extension of the recent bounce from the 1.3615 area, or a one-and-half-month low, coinciding with 100-day Simple Moving Average (SMA) support.

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 this week, where comments by central bankers might infuse significant volatility in the markets. In the meantime, traders will take cues from the flash PMI prints from the UK and the US on Wednesday to grab short-term opportunities heading into the key event risk