GBP/USD stuck in a range around 1.1600 mark, downside remains cushioned

• GBP/USD is seen consolidating its recent strong move up to a multi-week high.
• A combination of factors underpins the USD and acts as a headwind for the pair.
• The set-up favours bulls and supports prospects for further gains for the major.

The GBP/USD pair enters a bullish consolidation phase and oscillates in a narrow trading band, around the 1.1600 mark through the early European session on Monday.

The US dollar kicks off the new week on a positive note and looks to build on its recent strong bounce from over a one-month low, which, in turn, acts as a headwind for the GBP/USD pair. Investors turned cautious following the disappointing release of Manufacturing PMI from China, which unexpectedly shrank in October. This adds to worries about economic headwinds stemming from the resurgence of new COVID-19 cases in China and tempers investors' appetite for riskier assets.

Apart from this, elevated US Treasury bond yields, bolstered by bets for another supersized 75 bps Fed rate hike in November, continue to underpin the greenback. That said, signs of a slowdown in the US economy might force the Fed to soften its hawkish stance. This, in turn, is holding back the USD bulls from placing aggressive bets. Apart from this, expectations for a 75 bps hike by the Bank of England offer some support to the GBP/USD pair, at least for the time being.

Furthermore, investors see the new UK Prime Minister Rishi Sunak as someone who can bring stability to the recent volatile markets and keep the British economy stable. This, along with last week's bullish breakout through the 1.1480-1.1485 supply zone and acceptance above the 1.1500 psychological mark,  supports prospects for additional gains for the GBP/USD pair. Traders, however, might refrain from placing aggressive bets ahead of the key central bank event risk.

The Fed is scheduled to announce the outcome of a two-day policy meeting on Wednesday. This will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the GBP/USD pair. In the meantime, spot prices seem more likely to prolong the consolidative price move amid absent relevant market-moving economic releases, either from the UK or the US on Monday.

Technical levels to watch