GBP/USD gathers strength for a break towards 1.2600, US CPI and UK Employment eyed

• GBP/USD is looking to come out of the woods for a break towards 1.2600 amid a mild correction in the USD Index.
• Overall market sentiment is quite positive as a pause in the policy-tightening spell by Fed is easing fears of a US recession.
• The speech from BoE Bailey is likely to provide cues about the likely monetary policy action.

The GBP/USD pair has turned sideways around 1.2580 after an upside move in the early London session. The Cable is making efforts for resuming its upside journey and recapture the round-level resistance of 1.2600 as the US Dollar Index (DXY) has shown a corrective move after facing stiff barricades around the 103.70 resistance.

S&P500 futures have added more gains in the European session as the odds of a neutral interest rate policy stance by the Federal Reserve (Fed) are skyrocketing. Overall market sentiment is quite positive as a pause in the policy-tightening spell by Fed chair Jerome Powell is easing fears of a recession in the United States. A report from Goldman Sachs shows that the possibility of a recession in the US economy has been trimmed to 25% from prior chances of 35%.

The US Dollar Index (DXY) is expected to remain on the tenterhooks ahead of the US Consumer Price Index (CPI) data, which will be announced on Tuesday. As per the estimates, monthly headline CPI is expected to accelerate by 0.3% at a slower pace than the 0.4% recorded in April. The pace in monthly core inflation is seen steady at 0.4%.

Fed chair Jerome Powell and his teammates are worried about persistence in core inflation as demand for durables and services is extremely solid. Investors should note that the US service sector contributes two-thirds of the overall Gross Domestic Product (GDP) of the US economy.

On the Pound Sterling front, investors are awaiting the release of the United Kingdom Employment data (May). As per the estimates, Claimant Count Change is seen declining by 9.6K vs. a sheer addition of 46.7K reported in April. The Unemployment Rate for three months is seen higher at 4.0% against the prior release of 3.9%.

Apart from the UK Employment data, the speech from Bank of England (BoE) Governor Andrew Bailey will be in focus. BoE Bailey is likely to provide cues about the likely monetary policy action ahead.