GBP/USD advances beyond mid-1.3500s, fresh high since February 2022

• GBP/USD kicks off the new week on a positive note and climbs to a fresh multi-year top.

• Bets that the BoE will cut rates at a slower pace underpin the GBP and support the pair.

• US fiscal concerns and dovish Fed expectations weigh on the USD and benefit spot prices.

The GBP/USD pair is seen building on last week's strong move up and gaining some follow-through positive traction during the Asian session on Monday. The momentum lifts spot prices beyond the 1.3550 level, to the highest level since February 2022, and is sponsored by a combination of factors.

The British Pound (GBP) continues with its relative outperformance on the back of the upbeat UK Retail Sales figures released on Friday, which suggest that consumer spending remains a bright spot despite a gloomy economic outlook. This, along with higher-than-expected inflation in April, fueled speculations that the Bank of England (BoE) would pause at its next meeting on June 18 and take its time before lowering borrowing costs further.

The US Dollar (USD), on the other hand, continues with its struggle to attract any meaningful buyers amid worries that the tax and spending bill will worsen the US budget deficit at a faster pace than previously expected. Adding to this, the growing acceptance that the Federal Reserve (Fed) will cut interest rates further in 2025 drag the USD to a nearly one-month low and further contributes to the GBP/USD pair's positive move.

Moving ahead, investors this week will confront the release of important US macro releases – starting with Durable Goods Orders on Tuesday, followed by the Prelim GDP print on Thursday. This, along with FOMC meeting minutes on Wednesday and the US Personal Consumption Expenditure (PCE) Price Index on Friday, might provide cues about the Fed's rate-cut path, which will influence the USD and the GBP/USD pair.