During the Asian session on Tuesday, the GBP/USD pair trades with a positive bias for the second consecutive day and reaches a three-day high near 1.2770. Spot prices, however, continue to trade within a familiar range that has persisted for roughly three weeks. Before positioning for an extension of the recent rebound from a one-and-a-half-month low, caution is warranted around the 1.3615 area, which also marks the 100-day Simple Moving Average (SMA) support.

Continue to support the British Pound (GBP) and act as a tailwind for the GBP/USD pair are expectations that the Bank of England (BoE) will raise interest rates further. In fact, current market pricing indicates a greater than 80% probability of a 25-bps rate hike at the September meeting of the Bank of England. The fact that wages in the United Kingdom reached a new record growth rate in the second quarter boosted wagers and added to concerns about long-term inflation, despite 14 consecutive rate increases. In addition, the optimistic UK GDP report and marginally higher UK CPI print support the likelihood of additional BoE policy tightening.

The US Dollar (USD), on the other hand, hovers just below its highest level in over two months, which was reached last week, and prevents bulls from placing aggressive wagers on the GBP/USD pair, at least for the time being. US Treasury bond yields remain supported by the belief that the Federal Reserve (Fed) will maintain its hawkish posture and keep interest rates higher for longer. In addition to this, a generally weakened risk tone is viewed as another factor supporting the safe-haven dollar. Concerns about China's worsening economic conditions have contributed to a fragile market sentiment.

Investors may also choose to remain on the sidelines until the Jackson Hole Symposium later this week, where remarks from central bankers may inject significant volatility into the markets and provide fresh impetus for the GBP/USD pair. On Wednesday, the focus will shift to the flash PMI readings from the United Kingdom and the United States, which will indicate the economic health and whether the respective central banks can afford to raise interest rates further. In the interim, traders will monitor Tuesday's US economic calendar, which includes the release of Existing Home Sales and Richmond Manufacturing Index.

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