GBP/USD trades with mild gains around 1.3555 in Monday’s early Asian session.
Investors bet on a Fed interest rate cut on Wednesday.
UK GDP growth remained stagnant in August, as expected.
The GBP/USD pair posts modest gains near 1.3555 during the early Asian session on Monday. Traders expect the US Federal Reserve (Fed) to deliver its first rate cut of the year at its policy meeting on Wednesday, which might weigh on the US Dollar (USD). Later on Monday, the New York Empire State Manufacturing Index for September will be released.
Bets are strongly in favor of a Fed rate reduction at the September meeting on Wednesday, fueled by recent evidence of a weakening labor market. According to the CME FedWatch tool, traders are now pricing in a near 100% probability of a quarter-point rate cut at the upcoming meeting. A small minority even sees a possibility of a jumbo rate cut.
Fed officials, including Chair Jerome Powell, have made it clear that future policy decisions will be data-dependent. The attention will shift to the Summary of Economic Projections (SEP), which might give insight into economic forecasts and their views on the appropriate Federal Funds Rate path ahead. Any dovish remarks from the Fed could weigh on the Greenback and act as a tailwind for the major pair.
On the other hand, the downbeat UK Gross Domestic Product (GDP) and factory data for July might exert some selling pressure on the Pound Sterling (GBP). Concerns over UK economic growth are likely to prompt traders to raise bets supporting more interest rate cuts by the Bank of England (BoE) in the remainder of the year. Markets have priced in around a 33% odds that the UK central bank will reduce borrowing rates one more time this year, according to Reuters.
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