Pound Strengthens Slightly, US Dollar Pressured by Interest Rate Cut Expectations
The GBP/USD currency pair rose to around 1.3235 in early European trading on Wednesday. The pound's strengthening occurred amidst a weakening US dollar, as markets grew increasingly confident that the Federal Reserve (The Fed) would cut its benchmark interest rate by 25 bps at its meeting next week. These expectations of policy easing have diminished the appeal of the US dollar and provided a boost to the GBP.
Expectations of a Fed rate cut strengthened following dovish comments from several US central bank officials and economic data showing signs of slowdown. According to the CME FedWatch Tool, the probability of a December rate cut is now approaching 89%. Furthermore, US President Donald Trump has stated that he will appoint a new Fed chairman in early 2026, with Kevin Hassett reportedly the leading candidate. Hassett is seen as a dovish figure, potentially adding pressure on the dollar if elected.
From the UK perspective, the room for the pound to strengthen is expected to remain limited. Softening inflation, a cooling labor market, and the latest budget policy have led the market to expect the Bank of England (BoE) to also cut interest rates in December. British Prime Minister Keir Starmer emphasized the importance of lowering inflation and interest rates to stimulate investment and economic growth. Analysts estimate the BoE's interest rate could fall to 3.75%, with a probability of around 90%. Expectations of easing from both central banks are potentially limiting GBP/USD movements in the short term. (asd)
Source: Newsmaker.id
