GBP/USD climbs to 1.2600, away from multi-month low set on Friday on weaker USD

• GBP/USD kicks off the new week on a positive note and snaps a three-day losing streak. 

• Retreating US bond yields prompts some USD profit-taking and lends support to the pair.

• Reduced bets for a December BoE rate cut underpin the GBP and further act as a tailwind.

The GBP/USD pair opens with a bullish gap at the start of a new week and for now, seems to have snapped a three-day losing streak to sub-1.2500 levels, or its lowest level since May touched last Friday. Spot prices climb to the 1.2600 mark during the Asian session and draw support from a weaker US Dollar (USD).

The USD Index (DXY), which tracks the Greenback against a basket of currencies, pulls back from a two-year top as bulls opt to take some profits off the table on the back of a sharp pullback in the US Treasury bond yields. Apart from this, an extension of the risk-on rally across the global equity markets turns out to be another factor undermining the safe-haven buck and offering some support to the GBP/USD pair. 

Reports that Israel was close to reaching a ceasefire with the Hezbollah military group in Lebanon fueled optimism over some de-escalation in the long-running Middle East conflict. Adding to this, Scott Bessent's nomination as US Treasury Secretary clears a major point of uncertainty for markets and eases concerns about a dire trade war under the new Trump administration, which, in turn, boosts investors' confidence. 

Meanwhile, the British Pound (GBP) continues to be underpinned by reduced bets that the Bank of England (BoE) will cut rates next month, especially after data released last week showed that the underlying price growth in the UK gathered speed. In fact, the annual UK inflation climbed back above the central bank's target and accelerated sharply to 2.3% in October, suggesting that the BoE will move cautiously on interest rate cuts.

Any meaningful USD downfall, however, seems limited amid expectations that US President-elect Donald Trump's proposed expansionary policies will boost inflation and limit the scope for the Fed to cut interest rates further. This should act as a tailwind for the US bond yields and supports prospects for the emergence of some USD dip-buying, warranting caution before placing bullish bets around the GBP/USD pair.