Having reached a low since mid-June, trading below 1.2550 during Friday's early American session, GBP/USD succeeded in recovering a portion of its intraday losses on Monday.  During Monday's Asian trading hours, the GBP/USD currency pair rose back above 1.2600, only to pull back below this threshold in the early European session.

During the annual Jackson Hole Symposium held on Friday, Jerome Powell, the Chairman of the Federal Reserve, refrained from definitively stating that the Fed would maintain the current policy rate throughout the remainder of the year. Powell remarked that future rate decisions would be grounded in data and expressed the Fed's willingness to increase rates if circumstances necessitate.

Hawkish commentary from the Bank of England over the weekend maintained its influence on the current morning. Ben Broadbent, Deputy Governor of the Bank of England, cautioned about the necessity of an extended period of stringent monetary policy in order to rein in inflation.  Nevertheless, an outlook that suggests higher interest rates for an extended duration places the UK economy in a vulnerable position, susceptible to the threat of an economic recession. This lingering risk of a recession in the UK acts as a deterrent, possibly holding back GBP advances.

In the upcoming week, monetary policy divergence will pivot on the basis of US economic indicators. While the finalised UK manufacturing PMI figures constitute the extent of available UK economic indicators, the conversations stemming from the Bank of England will demand attention.

However, the pivotal moment in terms of market impact is anticipated to be on Thursday, when Huw Pill, Chief Economist of the Bank of England, has the potential to make significant adjustments. The persistent issue of wage growth in the UK remains a troublesome factor that could anchor the Bank of England's stance towards further rate hikes, despite the inherent risks posed to the UK economy.