• GBP/USD regains strong positive traction on Tuesday amid broad-based USD weakness.
• Hopes for a less hawkish Fed and sliding US bond yields weigh heavily on the greenback.
• Traders might refrain from placing aggressive bets ahead of the Fed and the BoE this week.

The GBP/USD pair attracts fresh buying near the 1.1460 area on Tuesday and reverses a major part of the previous day's downfall. The steady intraday ascent lifts spot prices back above the mid-1.1500s during the mid-European session and is sponsored by broad-based US dollar weakness.

The upside potential, however, seems limited amid the increasing likelihood that both the Federal Reserve and the Bank of England will hike their borrowing rates by 75 bps this week. Apart from this, the post-decision rhetoric will be closely scrutinized for fresh clues about the pace of the rate-hiking cycle, which will help determine the next leg of a directional move for the GBP/USD pair.

In the meantime, speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy continue to weigh on the USD. In fact, the current market pricing indicates over a 50% chance that the US central bank will hike rates by 50 bps at the December meeting. This leads to a further decline in the US Treasury bond yields and undermines the greenback.

Apart from this, a goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - is seen exerting additional downward pressure on the safe-haven buck. That said, traders might refrain from placing aggressive bets and prefer to move to the sidelines ahead of the central bank event risks - the Fed on Wednesday and the BoE on Thursday.

Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move. Market participants now look forward to the release of the US ISM Manufacturing PMI. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and allow traders to grab short-term opportunities around the GBP/USD pair.

Technical levels to watch