GBP/USD Surges Past 1.3450 Amid Growing Expectations of Fed Rate Cuts
US Dollar Weakness Boosts Pound Sterling
The GBP/USD currency pair climbed above the 1.3450 mark, driven by a weakening US Dollar as markets increasingly anticipate additional Federal Reserve interest rate cuts in 2025. According to the CME FedWatch Tool, there is now a 97% probability of a rate reduction in October, with a 76% chance of another cut in December. This shift in expectations has provided upward momentum for the British Pound against the US Dollar.
UK Economic Growth Supports Sterling Gains
The Pound’s strength is further supported by positive economic data from the United Kingdom, which showed growth in the second quarter. This economic resilience contrasts with the softening US labor market, reinforcing the Pound’s appeal in the currency markets. As a result, GBP/USD extended its winning streak for the fourth consecutive session, trading near 1.3460 during Asian trading hours on Wednesday.
US Labor Market Signals Slowdown
Recent US labor market data revealed a cooling trend. Although job openings slightly increased from 7.21 million to 7.23 million in August, the hiring rate dropped to 3.2%, the lowest since June 2024. Layoffs remained minimal, indicating a mixed but overall slowing employment environment. These figures have heightened expectations that the Federal Reserve may ease monetary policy to support the economy.
Market Eyes Upcoming US Economic Reports Amid Government Shutdown
Traders are now closely watching the upcoming releases of September’s US ADP Employment Change and ISM Manufacturing PMI data. However, these reports may be impacted by the ongoing US government shutdown, which has led to furloughs for approximately 750,000 federal employees after Congress failed to approve funding bills. The US Labor Department announced a suspension of some data releases, adding uncertainty to the economic outlook.
Implications for Currency Markets
The combination of a slowing US labor market, rising odds of Federal Reserve rate cuts, and positive UK economic performance has created a favorable environment for the British Pound. The weakening US Dollar reflects concerns about the US economic trajectory and monetary policy easing, which in turn supports GBP/USD’s upward momentum. Market participants remain attentive to forthcoming economic data and political developments that could influence future currency movements.
