GBP/USD recovers from the recent losses, remains below 1.2500

• GBP/USD snaps the losses due to a pullback in the Greenback.
• US robust labor data provided support in underpinning the US Dollar (USD).
• Investors expect the conclusion of BoE’s policy tightening phase could place downward pressure on the Pound Sterling (GBP).

GBP/USD breaks the three-day losing streak, trading higher around 1.2490 during the Asian session on Friday. The pair is currently finding support as a result of a correction in the US Dollar (USD) following a three-day winning streak. This correction can be attributed to the pullback in US Treasury yields, with the 10-year US Treasury bond yields dropping to 4.22%, marking a 1.36% decrease since the previous day.

Employment data released on Thursday from the United States (US) revealed that as of September 1, US Initial Jobless Claims stood at 216K, indicating a decrease from the previous figure of 229K. This figure was better than the expected increase of 234K. Furthermore, in the second quarter (Q2), US Unit Labor Costs rose to 2.2%, up from the previous 1.6%, which was contrary to expectations of it remaining consistent.

However, the US Dollar (USD) continues to derive strength from the ongoing series of positive economic data regarding the state of the US economy. US Dollar Index (DXY), which gauges the Greenback's performance against six other major currencies, is currently trading around 104.90, albeit below its highest level marked on Thursday since April.

US Federal Reserve (Fed) is poised to sustain elevated interest rates over an extended timeframe. Furthermore, there is an expectation that the Fed will enact a 25 basis point (bps) interest rate hike during its November and December meetings. This hawkish stance is providing substantial support for bolstering the US Dollar (USD).

On the other side, the belief that the Bank of England (BoE) is approaching the conclusion of its policy tightening phase might exert downward pressure on the Pound Sterling (GBP) and limit the upside potential of the GBP/USD pair.

However, BoE Governor Andrew Bailey conveyed to lawmakers on Wednesday that the central bank is nearing the conclusion of its series of interest rate hikes. However, he cautioned that borrowing costs could still see additional increases due to persistent high inflation.