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Pound Sterling (GBP) struggled higher against the US Dollar (USD) on Tuesday near three-week lows of 1.3060. However, the near-term outlook for GBP/USD remains fragile as the greenback holds on to gains near a new seven-week high, with the U.S. Dollar Index (DXY) trading around 102.50. The U.S. dollar strengthened because market participants were low on expectations for another 50 basis point interest rate cut by the Federal Reserve in November.
The Fed cut interest rates by 50 basis points in September, kicking off its policy easing cycle with a primary focus on reviving labor market strength after gaining confidence that inflation will sustainably return to the bank’s 2% target.
Market participants expect the Federal Reserve to aggressively extend its rate-cutting cycle. However, improving US non-farm payrolls (NFP) data for September, which showed strong growth in labor hiring, falling unemployment and rising wages, put that speculation to rest.
Although market speculation about a sharp interest rate cut by the Federal Reserve has subsided, the central bank is still expected to continue to further ease monetary policy. Meanwhile, comments from New York Fed President John Williams in an interview with the Financial Times on Tuesday suggested he was leaning toward a quarter-point rate cut in the future and was in no rush to cut rates quickly as the latest jobs data strengthened his view. Confidence in consumer spending and economic growth.
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