GBP/USD holds positive ground above 1.2800, weaker US Manufacturing PMI weighs on US Dollar

The GBP/USD pair attracts some buyers around 1.2810 during the early Asian session on Tuesday. The uptick of the major pair near multi-week highs is bolstered by the softer US dollar (USD) after the weaker-than-expected US Manufacturing PMI data. Later on Tuesday, the US Factory Orders and JOLTs Job Openings will be released. 

The manufacturing sector in the United States contracted at an accelerating pace in May, the Institute for Supply Management (ISM) reported on Monday. The US ISM Manufacturing PMI dropped to 48.7 in May from 49.2 in April, below the market consensus of 49.6. The Greenback faced some renewed selling pressure in response to the downbeat data. 

Ahead of the blackout period for the FOMC, Minneapolis Fed president Neel Kashkari noted that interest rates need to stay on hold for an “extended” time, adding that lowering borrowing costs before inflation was under control would put the foundations of US prosperity at risk. Nonetheless, the recent cooler US PCE inflation data and weaker US Manufacturing PMI have triggered the expectation that the US Federal Reserve (Fed) will cut the interest rate this year. Traders are now pricing in nearly a 53% possibility of a Fed rate cut in September, up from 49% before the report.

On the other hand, the markets anticipate that the Bank of England (BoE) could start cutting interest rates from the August meeting as UK annual headline inflation eased significantly in April. However, the BoE policymakers remain worried about slower progress in the service disinflation process. In the absence of top-tier economic data releases from the UK, the USD price dynamics will continue to play a key role in influencing the GBP/USD this week.