GBP/USD Holds Tight Range Near 1.27 ,Turns Bearish in EU Session

During the Asian trading hours on Monday, the GBP/USD currency pair experienced minimal fluctuations within a narrow range near 1.2700. However, as the early European session commenced, the pair began to decline. The current positive sentiment towards riskier assets seems to be aiding in limiting the pair's losses, at least temporarily, as traders eagerly anticipate the release of the US ISM Manufacturing PMI report.

The selling pressure on the US Dollar (USD) observed on Friday led to a significant rebound in GBP/USD. The release of US data indicating a decline in the annual Personal Consumption Expenditures (PCE) Price Index from 4.3% in April to 3.8% in May contributed to the USD losing nearly 0.5% as reflected in the US Dollar Index. This decline underscored the negative impact of the PCE data on the valuation of the USD.

Nevertheless, the USD has shown resilience against its counterparts on Monday, primarily due to market confidence in a 25 basis points (bps) rate hike by the Federal Reserve in July.

As the day progresses, market participants will eagerly await the release of the ISM Manufacturing PMI report for potential fresh market impetus. The headline PMI is expected to slightly increase from 46.9 in May to 47.2 in June, indicating a continued contraction in the sector's business activity, albeit at a slower pace.

If the PMI reading unexpectedly declines, it could exert downward pressure on the USD, potentially allowing GBP/USD to gain momentum. However, with US financial markets closing early in observance of the Independence Day Holiday, any market reaction is likely to be short-lived.