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After trading sideways below 1.2350 during the Asian session, the GBP/USD pair has attempted a recovery. Following the ratification of a debt-ceiling increase in the United States, the US Dollar Index (DXY) plummeted, leading to a rise in the British pound.

Republicans in the House of Representatives, led by Kevin McCarthy, have approved a two-year increase in the United States' borrowing limit from $31.4 trillion to $31.4 trillion. The White House has consented to reduce spending for the budget, but refuses to reduce health coverage or increase poverty.

Despite decreasing concerns about a U.S. Fed default on its financial obligations, S&P500 futures have pared some of the gains made in early Asia.

As a result of the approval of a higher US debt-ceiling, fears of a spike in interest rates if the US Treasury had proclaimed a default have dissipated, putting severe pressure on the US Dollar Index. In addition, an increase in the US debt ceiling would attract credit rating agencies, which would lower the US economy's long-term credibility. This could have a substantial effect on the US Dollar Index (DXY) and US stocks.

This week, investors will focus on the Automatic Data Processing (ADP) Employment data (May), which will be released on Thursday. According to the consensus, the US labor market has experienced a 22K decline in payroll numbers, as opposed to the previous increase of 296K.

In the meantime, the British pound has shown signs of recovery as the Bank of England (BoE) is anticipated to raise interest rates further in light of the fact that inflationary pressures in the United Kingdom are anticipated to remain extremely persistent. As pledged by UK Prime Minister Rishi Sunak, BoE Governor Andrew Bailey will cut inflation in half by the end of the year.

Barclays anticipates that the BoE will extend the tightening cycle beyond the June meeting, forecasting one additional 25bps raise in August - now predicting that the BoE's terminal bank rate will be 5%.

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