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- GBP/USD gains some positive traction and snaps a six-day losing streak amid a softer USD.
- BoE rate cut bets and UK fiscal concerns might keep a lid on any further gains for the GBP.
- Traders might also opt to wait for the FOMC decision, the Trump-Xi meet, and the US PCE data.
The GBP/USD pair kicks off the new week on a slightly positive note and holds steady above the 1.3300 round figure during the Asian session, though it lacks follow-through buying. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside and backs the case for an extension of a six-day-old downtrend.
The British Pound (GBP) continues with its relative underperformance amid firming expectations for further easing by the Bank of England (BoE), which, in turn, is seen acting as a headwind for the GBP/USD pair. Traders are pricing in a 40% chance of a 25-basis-point (bps) rate reduction by the BoE in November, and 65 bps of cuts by the year-end. The bets were reaffirmed by unexpectedly steady inflation data released last week and some signs of cooling in the UK jobs market.
Moreover, worries about the UK’s fiscal outlook ahead of the crucial Autumn budget in November might contribute to capping the GBP/USD pair. The US Dollar (USD), on the other hand, struggles to build on Friday’s bounce from a one-week low touched in reaction to softer US consumer inflation figures amid bets that the US Federal Reserve (Fed) will cut rates two more times this year. Apart from this, concerns about a prolonged US government shutdown undermine the Greenback.
Traders, however, might refrain from positioning for a firm near-term direction and opt to wait for the outcome of a two-day FOMC policy meeting on Wednesday. The market focus will then shift to the crucial Trump-Xi meeting later this week. Adding to this, the release of the US Personal Consumption Expenditure (PCE) Price Index on Friday will play a key role in influencing the near-term USD price dynamics and providing some meaningful impetus to the GBP/USD pair.
