GBP/USD was up some 0.54% in mid-morning US session trade on Monday, traveling from a low of 1.2274 to score a high of 1.2420 after the US Dollar fell sharply during the Wall Street opening hours. 

The greenback was heavily dented by Monday's economic reports that showed US manufacturing activity in March slumped to its lowest level in nearly three years as new orders continued to contract. The Institute for Supply Management (ISM) reported that its Manufacturing PMI fell to 46.3 last month. This was the worst since May 2020, from 47.7 in February. 

Meanwhile, last week’s PCE data, the Federal Reserve´s preferred inflation measure, were mixed.  While headline and core both came in a tick lower than expected, super core accelerated for a second straight month to 4.63% YoY and is the highest since October.  ´´This is not the direction that the Fed desires and so we look for the hawkish tilt in Fed comments to continue,´´ analysts at Brown Brothers Harriman explained. 

Nevertheless, federal funds futures are now pricing in a 60% chance of another 25 basis-point (bp) rate hike by the Fed in May, down around 5% on the back of today´s manufacturing data. Moreover, futures traders have also factored in a pause in June and rate cuts by December. Traders will now await the Services data tomorrow. ´´We look for the ISM Services index to retreat after showing signs of stabilization at a still-firm level of ~55 in Jan-Feb,´´ analysts at TD Securities said.