• GBP/USD ticks lower during the Asian session, albeit lacks follow-through selling.
• The USD stalls its retracement slide from a multi-month top and undermines the pair.
• Traders now look to the UK monthly employment data for some meaningful impetus.

The GBP/USD pair extends the previous day's late pullback from the vicinity of mid-1.2500s and ticks lower during the Asian session on Tuesday. Spot prices currently trade around the 1.2500 psychological mark and remain well within the striking distance of a three-month low touched last week.

The US Dollar (USD) attracts some dip-buying and reverses a part of the overnight sharp downfall, stalling its retracement slide from the highest level since March, which, in turn, is seen weighing on the GBP/USD pair. Growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer, along with the prevalent cautious market mood, seems to benefit the safe-haven Greenback.

It is worth recalling that the markets have been pricing in the possibility of one more 25 bps Fed rate hike move by the end of this year. The bets were reaffirmed by the upbeat US macro data released last week, which pointed to a resilient economy. Moreover, The Wall Street Journal reported over the weekend that some officials still prefer to err on the side of raising rates too much, reasoning that they can cut them later.

The hawkish outlook remains supportive of elevated US Treasury bond yields and continues to fuel worries about economic headwinds stemming from rapidly rising borrowing costs. This, in turn, tempers investors' appetite for riskier assets and drives some haven flows towards the buck. That said, Monday's hawkish remarks by Bank of England (BoE) policymaker Catherine Mann could limit the downside for the GBP/USD pair.

Mann said that it was too soon for the BoE to stop raising interest rates and that it was better for the central bank to err on the side of raising them too high rather than stopping prematurely. This comes after BoE Governor Andrew Bailey warned last week that borrowing costs might still have further to rise because of stubbornly high inflation. Bailey, however, told lawmakers that the BoE is much nearer to ending its run of rate increases.

The mixed fundamental backdrop, meanwhile, might hold back traders from placing aggressive directional bets around the GBP/USD pair ahead of the US jobs report, due later during the early European session. The focus will then shift to the monthly UK GDP report on Wednesday, which will be followed by the release of the crucial US consumer inflation figures and provide some meaningful impetus to the major.

Technical levels to watch