- GBP/USD trades with a softer tone near 1.3310 in Monday's Asian session.
- Growing expectations of additional Fed rate cuts later this year could weigh on the US Dollar.
- Focus shifts to the preliminary UK and US PMI data for September, set to be released on Monday.
The GBP/USD pair slips to 1.3310, ending its three-day winning streak during Monday's early Asian session as a modest recovery in the US Dollar (USD) weighs on the pair. Market participants are now turning their attention to the flash readings of the UK and US Purchasing Managers Index (PMI) data, set for release later in the day.
Last week, the US Federal Reserve (Fed) cut its key overnight borrowing rate by half a percentage point, marking the first rate cut since the early Covid pandemic. The Fed’s statement expressed growing confidence that inflation is moving toward the 2% target, with risks to employment and inflation now appearing balanced.
Fed Chair Jerome Powell remained cautious, refraining from declaring victory over inflation as price pressures continue to ease. The upcoming release of the US Personal Consumption Expenditures (PCE) index, the Fed's preferred measure of inflation, on Friday may offer further insight into inflation trends and the future direction of US interest rates. However, ongoing uncertainty about the US economic outlook and rising expectations of further Fed rate cuts later this year continue to weigh on the USD against the Pound Sterling (GBP).
Meanwhile, Bank of England (BoE) Governor Andrew Bailey emphasized the importance of keeping inflation low, stating that "we need to be careful not to cut the interest rate too quickly or by too much." The BoE recently held interest rates steady at 5.0%, a decision made following the UK's Consumer Price Index (CPI) inflation data, which remained unchanged at 2.2% year-over-year in August.
