GBP/USD consolidates around 1.3400, remains close to two-month low

• GBP/USD struggles to gain any meaningful traction and remains confined in a range.
• Bets that the BoE could cut rates in August undermine the GBP and cap spot prices.
• Mixed Fed rate cut signals keep the USD bulls on the defensive and offer support.

The GBP/USD pair kicks off the new week on a subdued note and oscillates in a narrow band, just above the 1.3400 round figure during the Asian session. Meanwhile, spot prices remain well within striking distance of a nearly two-month low touched last week.

The US Dollar (USD) remains on the back foot below the monthly peak touched last Thursday amid mixed signals about the Federal Reserve's (Fed) rate-cut path, which, in turn, is seen acting as a tailwind for the GBP/USD pair. In fact, Fed Governor Christopher Waller last week backed the case for a rate cut in July. Investors, however, seem convinced that the US central bank will keep interest rates higher for longer amid the evidence that the Trump administration's increasing import taxes are passing through to consumer prices.

The British Pound (GBP), on the other hand, is undermined by the growing acceptance that the Bank of England (BoE) could cut interest rates in August. The bets were reaffirmed by the UK jobs data last Thursday, which showed that the unemployment rate rose to a four-year high level of 4.7% and the annual rate of pay growth in the three months between March and May slowed to 5%, or the lowest since the second quarter of 2022. This, to a larger extent, overshadows still sticky UK inflation and contributes to capping the GBP/USD pair.

The market focus now shifts to BoE Governor Andrew Bailey's testimony before the Treasury Select Committee on Tuesday. Apart from this, the release of the flash PMIs from the UK and the US, along with the UK Retail Sales data, could provide some meaningful impetus to the GBP/USD pair during the latter part of the week. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside, and any attempted recovery could be seen as a selling opportunity.