GBP/USD consolidates just below mid-1.3400s; bullish potential seems intact

• GBP/USD pauses for a breather after last week's hawkish BoE-inspired strong move up.
• Rising Fed rate cut bets keep the USD bulls on the defensive and support spot prices.
• Traders look to this week's key US/UK macro releases for some meaningful impetus.

The GBP/USD pair kicks off the new week on a subdued note and consolidates its recent goodish recovery gains from the 1.3140 area, or the lowest level since April 14, touched earlier this month. Spot prices trade just below mid-1.3400s during the Asian session, nearly unchanged for the day, though the fundamental backdrop seems tilted in favor of bullish traders.

The Bank of England (BoE), as was widely expected, delivered a 25-basis-point (bps) rate cut last week, bringing the benchmark interest rate down to 4%, its lowest level since 2023. However, the narrow 5-4 vote split suggested more resistance to rate cuts than markets had expected and forced traders to scale back their bets on aggressive BoE easing. This might continue to underpin the British Pound (GBP), which, along with subdued US Dollar (USD) price action, acts as a tailwind for the GBP/USD pair.

The USD Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on Friday's modest bounce from a two-week low amid rising bets that the Federal Reserve (Fed) will lower borrowing costs in September. Adding to this, traders are also pricing in the possibility that the US central bank will cut interest rates at least two times by the end of this year. This should keep the USD bulls on the defensive and validate the near-term positive outlook for the GBP/USD pair.

Meanwhile, dovish Fed expectations were reaffirmed by comments from Fed Governor Michelle Bowman on Saturday, saying that three interest rate cuts will likely be appropriate this year. Bowman added that the apparent weakening in the labor market outweighs the risks of higher inflation to come. This, in turn, suggests that any corrective pullback might be seen as a buying opportunity, which should limit the downside for the GBP/USD pair ahead of this week's important macro releases.

The latest US consumer inflation figures will be published on Tuesday, followed by the preliminary UK Q2 GDP print and the US Producer Price Index (PPI) on Thursday. The crucial data should provide some meaningful impetus to spot prices and help determine the next leg of a directional move. In the meantime, speeches from influential FOMC members could drive the USD demand and the GBP/USD pair in the absence of any relevant market-moving economic data from the UK or the US.