GBP/USD retraces its recent gains from the previous session, trading around 1.3520 during the Asian hours on Tuesday. The pair depreciates as the US Dollar (USD) gains ground, driven by persistent inflationary pressures in the United States (US), which heightened uncertainty over potential Federal Reserve (Fed) rate cuts. Traders will likely observe the August ISM Manufacturing Purchasing Managers Index (PMI) later in the day.

Furthermore, traders will also observe upcoming labor market data this week that could shape the US Federal Reserve's (Fed) policy decision in September. Key reports include ADP Employment Change, Average Hourly Earnings, and Nonfarm Payrolls for August.

However, the downside of the GBP/USD pair could be limited as the US Dollar (USD) may struggle amid the increasing likelihood of a US Federal Reserve (Fed) rate cut in the September meeting. The CME FedWatch tool suggests a pricing in more than 89% of a 25 basis points (bps) rate cut by the Fed at the September policy meeting, up from an 84% chance a week ago.

Traders assess the timing of the Autumn Budget as the United Kingdom (UK) Parliament returns from summer recess. Treasury Committee questioning of Bank of England (BoE) policymakers will be observed to gain fresh clues on future policy outlook.

The GBP/USD pair may regain its ground as the Pound Sterling (GBP) could draw further support from the fading odds of further BoE rate cuts, following persistent inflationary pressures in the United Kingdom (UK). Catherine Mann, a member of the BoE Monetary Policy Committee (MPC), stated last week that the bank rate should be held persistently to lean against inflation risks.

Source: FXstreet