GBP/USD hovers below 1.2500, downside remains favored on firmer DXY, US NFP buzz

• GBP/USD is oscillating in an 18-pips range and a downside break looks likely on risk-off impulse.
• The DXY has been strengthened on the upbeat US ISM Manufacturing data.
• This week the release of the US NFP holds significant importance.

The GBP/USD pair is displaying a topsy-turvy move in a narrow range of 1.2474-1.2492 in the Asian session. A lackluster performance in the cable is followed by a vertical downside move as an improved appeal for safe-haven assets resulted in a sell-off in the risk-perceived assets. The asset witnessed a steep fall after slipping below the crucial support of 1.2560 on Wednesday.

The US dollar index (DXY) has turned into a consolidation phase after witnessing a significant buying interest from the market participants. Stronger than expected US ISM Manufacturing PMI, released on Wednesday, strengthened the greenback against pound. The ISM Manufacturing PMI landed at 56.1, higher than the forecasts of 54.5 and the prior print of 55.4. An outperformance from the US economy on Manufacturing PMI despite rising inflationary pressures spurted a rally in the DXY.

Going forward, investors’ focus will remain on the release of the US Nonfarm Payrolls (NFP). This time, the NFP holds more importance as it will be the last employment data before the announcement of the June monetary policy by the Federal Reserve (Fed). The US economy may have added 325k jobs in May much lower than the 425k job additions recorded in April.

On the pound front, a light calendar week will assign more focus to the DXY. However, the discussions over the monetary policy announcement by the Bank of England (BOE) will keep the pound bulls active.  As per the market consensus, the BOE will announce an interest rate hike by 50 basis points (bps).