The GBP/USD pair is weakening, trading around 1.3155 during Monday’s early Asian session. The Pound Sterling (GBP) is losing ground against the US Dollar (USD) due to concerns over the UK’s fiscal debt and recent poor economic data. Investors are also anticipating a speech from Bank of England (BoE) External Member Catherine Mann later today.
The Pound’s decline follows reports that UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves have abandoned plans to increase income tax rates, a significant shift ahead of the November 26th budget. Furthermore, recent UK economic indicators, such as moderating wage growth and weaker Gross Domestic Product (GDP) figures, have intensified economic concerns. This has significantly increased expectations for a December rate cut by the BoE, with Reuters reporting an almost 80% probability for a 0.25 percentage point reduction, which could negatively impact the GBP in the short term.
Conversely, traders are preparing for a release of delayed US economic data following the government’s reopening. This data is largely expected to indicate a softening US economy, potentially putting downward pressure on the Greenback and offering some support to the GBP/USD pair. According to the CME FedWatch Tool, financial markets are currently pricing in a 54% chance of a 25 basis point (bps) rate cut by the US central bank at its December meeting, a decrease from the 62.9% probability seen earlier last week.
