GBP/USD rebounds on subdued US Dollar, inches higher to near 1.2600

GBP/USD snaps a two-day losing streak, retracing recent losses and trading near 1.2600 during the early European session on Monday. The decline in the US Dollar (USD) appears to be the catalyst underpinning the GBP/USD pair.

The dovish sentiment surrounding the Federal Reserve's stance on the trajectory of interest rates, with market sentiment leaning towards the Fed initiating interest rate cuts starting in June, is weakening the US Dollar.

The US Dollar Index (DXY) declines to near 104.30 as the 2-year and 10-year yields on US Treasury bonds hold at 4.60% and 4.21%, respectively, by the press time. The US Dollar (USD) fails to cheer the uptick in US Treasury yields.

Fitch Ratings revised the United Kingdom's sovereign credit outlook to stable from negative last Friday, affirming its sovereign credit rating at AA-. The revision came after the country's economy rebounded to growth in January from a shallow recession in the second half of 2023, boosted by a resurgence in retail sales and housing.

UK Retail Sales came in better than expectations, remaining flat in February. This figure was above the market consensus of a 0.3% decline and suggested a positive sign for the economy. Market participants will likely monitor the release of Gross Domestic Product (GDP) data for the fourth quarter of 2023 from the United Kingdom (UK) and the United States (US) on Thursday.