GBP/USD consolidates its recent gains to nearly three-week peak, US NFP report awaited

• GBP/USD touches a nearly three-week high and draws support from sustained USD selling.
• Diminishing odds for another Fed rate hike in June and a positive risk tone weigh on the buck.
• Speculations for further tightening by the BoE remain support ahead of the US NFP report.

The GBP/USD pair enters a bullish consolidation phase near a two-and-half-week high touched on Friday and oscillates in a narrow band, around the 1.2530-1.2535 region through the first half of the European session.

The US Dollar (USD) extends the overnight sharp retracement slide from the vicinity of its highest level since mid-March set on Wednesday and remains depressed for the second successive day, which, in turn, acts as a tailwind for the GBP/USD pair. A slew of influential Federal Reserve (Fed) officials this week backed the case for skipping an interest rate hike and forced investors to scale back their expectations for another 25 bps lift-off in June. This, along with a positive risk tone, weighs on the safe-haven buck.

A slightly better-than-expected private survey on Thursday, showing that China's manufacturing sector unexpectedly registered modest growth in May, raised hopes for hopes of a recovery in the world's second-largest economy. Adding to this, the passage of bipartisan legislation to lift the government's $31.4 trillion debt ceiling and avert an unprecedented American default boosts investors' confidence. This, along with expectations that the Bank of England (BoE) could raise rates further, lends support to the GBP/USD pair.

Bullish traders, however, seem reluctant to place aggressive bets and prefer to wait for fresh cues from Friday's release of the closely-watched US monthly employment details. The popularly known NFP report is due for release later during the early North American session and will influence market expectations about the Fed's next policy move. This, in turn, will drive the USD demand and provide a fresh impetus to the GBP/USD pair. Nevertheless, spot prices remain on track to snap a three-week losing streak.

Technical levels to watch