GBP/USD posts modest losses above the mid-1.2600s ahead of US ADP report

• GBP/USD clings to mild losses near 1.2665 on the firmer USD.
• Richmond Fed Barkin said the potential for additional rate hikes remains on the table.
• The fear of recession in the UK economy weighs on the British pound (GBP).
• Investors await the UK Composite PMI and the US ADP Employment Change.

The GBP/USD pair posts modest losses during the early Asian session on Thursday. The recovery of the US Dollar (USD) and US Treasury bond yields exerts some selling pressure on the pair. At the press time, GBP/USD is trading at 1.2665, up 0.01% on the day. Meanwhile, the US Dollar Index (DXY) surges to 102.45, the highest in three weeks.

On Wednesday, the US ISM Manufacturing PMI arrived at 47.4 versus 46.7 prior, better than the expectation of 47.1. Additionally, the labour market gauge of JOLTs Job Openings came in weaker than the estimation of 8.79M in November.

The minutes of the FOMC meeting in December indicated that participants believe the policy rate to be at or near its peak for this tightening cycle, while they cautioned that the exact policy path would depend on how the economy evolves. Richmond Fed President Thomas Barkin said earlier Wednesday that interest rate hikes remain on the table despite the progress in inflation control. This, in turn, lifts the Greenback against its rivals and acts as a headwind for the GBP/USD pair.

On the other hand, the fear of recession and a weakened manufacturing sector in the UK economy have diminished the appeal of the British pound (GBP). S&P Global revealed on Tuesday that Manufacturing PMI eased to 46.2 in December from the previous reading of 46.4.

Looking ahead, market players will keep an eye on the UK S&P Global/CIPS Composite PMI and Services PMI for December. Also, the US ADP Employment Change, weekly Initial Jobless Claims will be released on Thursday.