• GBP/USD stages a modest intraday bounce from a multi-day low touched earlier this Friday.
• The USD edges lower amid some repositioning trade ahead of the NFP and offers support.
• Concerns about the UK government’s fiscal plans, recession fears should cap further gains.

The GBP/USD pair reverses an intraday dip to a multi-day low, around the 1.1115 region touched in the last hour and refreshes its daily high during the early European session. The intraday move up lifts spot prices back above the 1.1200 round-figure mark, though lacks bullish conviction.

The US dollar eases a bit from the vicinity of the weekly high and turns out to be a key factor lending some support to the GBP/USD pair. The modest USD downtick could be solely attributed to repositioning trade ahead of the closely-watched US monthly jobs data, due for release later during the early North American session. That said, the prospects for a more aggressive policy tightening by the Fed, along with the prevalent risk-off environment, should limit any meaningful USD pullback.

In fact, market participants seem convinced that the US central bank will continue to hike rates at a faster pace to curb inflation and have been pricing in another supersized 75 bps increase in November. This remains supportive of elevated US Treasury bond yields. Meanwhile, concerns that rapidly rising borrowing costs will lead to a deeper global economic downturn tempers investors' appetite for riskier assets. The anti-risk flow should lend some support to the safe-haven greenback.

Furthermore, concerns about the UK government's fiscal policy and looming recession risks could also contribute to capping the upside for the GBP/USD pair. UK Prime Minister Liz Truss defended the tax-cut plan on Wednesday and said that cutting taxes is the right thing to do morally and economically. The fiscal package is expected to derail the Bank of England's efforts to contain high inflation and force it to turn more hawkish, which, in turn, would create additional economic headwinds.

The aforementioned fundamental backdrop warrants caution for aggressive traders and before positioning for any further appreciating move for the GBP/USD pair. Investors might also prefer to move to the sidelines and wait for the release of the US NFP report. The US labour market data will play a key role in Influencing Fed rate hike expectations and driving the USD demand in the near term. This, in turn, should allow traders to grab short-term opportunities around the major.

Technical levels to watch