GBP/USD sticks to modest gains, around mid-1.2600s despite weaker UK PMI

   •  The ongoing slump in the US bond yields kept the USD bulls on the defensive.
   •  The short-covering bounce lacked remained capped on disappointing UK PMI.
   •  Brexit/UK political uncertainties to keep a lid on the pair’s attempted bounce.

The GBP/USD pair held on to its mildly positive tone through the early European session and moved little following the release of UK manufacturing PMI.

The pair traded with a bullish bias for the second consecutive session and built on Friday's late rebound from nearly five-month lows. A subdued US Dollar price action – led by the ongoing slump in the US Treasury bond yields amid renewed fears of a global growth slowdown, was seen prompting some follow-through short-covering around the major.

Meanwhile, the intraday positive move seemed rather unaffected by the disappointing release of UK manufacturing PMI, coming in at 49.4 to show a contraction in May. The reading was well below the previous month's reading of 53.1 and worst than 52.0 expected, though did little to prompt any fresh selling. 

It, however, remains to be seen if the pair is able to capitalize on the positive move or the bounce runs out of the steam at higher levels amid heightened Brexit and UK political uncertainties, which has been one of the key factors weighing on the British Pound over the past few weeks.

Later during the early North-American session, the US economic docket - highlighting the release of ISM manufacturing PMI, will be looked upon for some short-term trading impetus, though is unlikely to be a major game changer given all the uncertainty that still surrounds the Sterling.

Technical levels to watch