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- GBP/USD gains ground to near 1.3305 in Wednesday’s early European session.
- The US Federal Reserve interest rate decision will be in the spotlight later on Wednesday.
- Financial markets now put the chance of a BoE rate cut next week at around 88%.
The GBP/USD pair trades on a firmer note around 1.3305 during the early European session on Wednesday. The Greenback edges lower against the Pound Sterling (GBP) as the US Federal Reserve (Fed) is widely expected to announce another interest rate cut on Wednesday. The UK monthly Gross Domestic Product (GDP) report will be published later on Friday.
Markets have priced in nearly a 90% probability that the US central bank will lower the benchmark overnight rate by 25 basis points (bps) at the conclusion of its two-day meeting on Wednesday. This would be the third rate reduction this year, bringing the target range to 3.50%-3.75%.
However, traders anticipate a “hawkish cut” with cautious forward guidance. The Fed potentially indicates a pause in early 2026 due to lingering inflation concerns and a still resilient labor market. This, in turn, could provide some support to the USD and create a headwind for the major pair.
On the GBP’s front, concerns over higher overall taxation levels following the announcement of the UK autumn budget, along with softer inflation and a cooling labor market, add weight to the prospect of further Bank of England (BoE) policy shifts. Financial markets are currently pricing in a high probability around 88% of a quarter-point reduction at the upcoming BoE’s December meeting after signs from economic data that inflation pressure has eased, according to the CME FedWatch tool.
