GBP/USD remains capped below 1.2700, US Services PMI eyed

• GBP/USD loses ground as the USD trades with mild gains on Monday.
• The markets were confident the rate-hike cycle was done, although Powell emphasized the Fed's willingness to tighten policy further if necessary.
• UK S&P Global/CIPS Manufacturing PMI climbed to 47.2 in November vs. 46.7 prior, better than expected.

The GBP/USD pair holds below the 1.2700 mark during the Asian session on Monday. However, the downside of the pair seems limited as the speculation that the Federal Reserve (Fed) is done with its tightening cycle exerts pressure on the US Dollar (USD) and creates a tailwind for the GBP/USD pair. The major currently trades around 1.2680, down 0.23% on the day.

The markets turned cautious following dovish comments from Fed Chair Jerome Powell on Friday. Traders prefer to wait on the sidelines ahead of the highly-anticipated employment report on Friday that could influence the outlook for US interest rates. Powell stated that it was clear that US monetary policy was slowing the economy as expected, with the benchmark overnight interest rate well into restrictive territory.

While Powell emphasized the Fed's willingness to tighten policy further if necessary, markets were confident the rate-hike cycle was done. This, in turn, weighs on the Greenback across the board.

On the GBP’s front, Bank of England (BoE) Governor Andrew Bailey said last week that the central bank would do whatever it takes to achieve its 2% inflation objective, but that he has not seen enough progress to be confident. On Friday, UK S&P Global/CIPS Manufacturing PMI climbed to 47.2 in November from 46.7 in October, above the market consensus of 46.6.

In the absence of economic data released from the UK docket this week, the GBP/USD pair remains at the mercy of USD price dynamics. On Tuesday, the US ISM Services PMI will be due, which is expected to grow from 51.8 to 52.0. The highlight this week will be the US Nonfarm Payrolls on Friday. The US economy is estimated to add 180K jobs in November. Traders will take cues from these figures and find trading opportunities around the GBP/USD pair.