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- GBP/USD gains some positive traction as dovish Fed expectations undermine the USD.
- Bets for a BoE rate cut this month act as a headwind for the GBP and cap spot prices.
- Traders also seem reluctant and opt to wait for the FOMC rate decision on Wednesday.
The GBP/USD pair attracts some buyers following the previous day’s two-way directionless price move and holds steady above the 1.3300 mark during the Asian session on Tuesday. Spot prices, however, lack strong follow-through buying as traders opt to wait on the sidelines ahead of this week’s key central bank event risk.
The US Federal Reserve (Fed) is scheduled to announce its policy decision at the end of a two-day meeting on Wednesday and is expected to lower borrowing costs again. The dovish outlook keeps a lid on the recent US Dollar (USD) recovery from its lowest level since late October, touched last week, which, in turn, is seen acting as a tailwind for the GBP/USD pair.
Meanwhile, the Organisation for Economic Cooperation and Development (OECD) upgraded its UK growth forecast last week and predicted that the Bank of England (BoE) will end its easing cycle in the second quarter of 2026. This, in turn, underpins the British Pound (GBP) and turns out to be another factor that offers additional support to the GBP/USD pair.
The GBP bulls, however, seem reluctant to place aggressive bets amid rising bets that the BoE will also cut interest rates next week. The expectations were reaffirmed by the latest UK inflation figures, which showed that the headline Consumer Price Index (CPI) decelerated to the 3.6% YoY rate in October, following a steady print of 3.8% for three consecutive months.
This, in turn, makes it prudent to wait for strong follow-through buying before positioning for an extension of the GBP/USD pair’s recent move from the 1.3000 psychological mark, touched in November. Traders now look to the US data – the ADP Weekly Employment Change and JOLTS Job Openings for some impetus later during the North American session.
