The GBP/USD currency pair is facing slight downward pressure, hovering around the 1.3370 level during Tuesday’s Asian trading session. This softening comes in the wake of reduced expectations regarding any imminent cuts to Federal Reserve interest rates, which has bolstered the value of the US Dollar. Markets are particularly focused on pending data from the US, with the September ISM Manufacturing Purchasing Managers Index (PMI) expected later in the day, alongside remarks from Federal Reserve officials.
Comments from Fed Chair Jerome Powell earlier in the week indicated a commitment to maintaining economic stability, though he emphasized that the central bank is not acting hastily in terms of rate adjustments. He highlighted a gradual approach in lowering benchmark rates over time. In addition, Atlanta Federal Reserve President Raphael Bostic expressed openness to a potential 50 basis point rate cut at the upcoming November meeting, should job growth show signs of slowing more drastically than anticipated. However, Bostic had previously suggested only a single 25 basis point rate reduction for the remainder of the year.
Attention will also shift to the US labor market data scheduled for release on Friday, which is likely to reassess the trajectory of Federal Reserve interest rate policy. Predictions for the Nonfarm Payrolls (NFP) report indicate an addition of approximately 140,000 jobs in September, while the unemployment rate is anticipated to remain stable at 4.2%. A weaker-than-expected jobs report could lead the Fed to contemplate more significant rate cuts, which might exert downward pressure on the US Dollar.
On the UK front, a Bank of England policymaker noted that a recovery driven by consumer spending could potentially heighten inflationary pressures. However, there are indications that traders are now less inclined to anticipate a rate cut from the Bank of England in November, despite recent shifts in economic forecasts.
