GBP/USD retakes 1.2600 handle but lacks momentum

The GBP/USD pair built on to its early recovery momentum and has now reversed Friday's minor losses to move back marginally above 1.2600 handle. 

After spending majority of the Asian session the said handle, the pair caught fresh bids during early European session amid subdued greenback price-action. The momentum, however, lacked conviction as investors now look to central bank decisions from both, the US and UK later during this week. 

The US Federal Reserve is widely expected to raise interest rates by 25 bps on Thursday, while the Bank of England, on Thursday, is expected to keep its current monetary policy stance unchanged. 

Meanwhile, the accompanying rate-statements and subsequent press conference would be looked upon for fresh insights over the central banks near-term monetary policy outlook and help investors determine the pair's trajectory in the near-term. 

In absence of any major market moving releases on Monday, the pair would take clues from the broader sentiment surrounding the US Dollar, which would continue to be driven by expectations over the pace of Fed rate-hike next year.

Technical levels to watch

A follow through buying interest, leading to a momentum above 1.2620 resistance (Friday's high), is likely to trigger a short-covering rally immediately towards 1.2670-75 intermediate resistance en-route 1.2700 round figure mark. On the downside, weakness below session low support near 1.2575 level is likely to drag the pair back towards an important support near 1.2550 region, which if broken might accelerate the slide towards 1.2500 psychological mark.