The GBP/USD pair is holding steady near 1.3245 during Monday’s Asian session as market participants continue to process the UK’s Autumn Budget. Any potential downside for the pair may be capped by increasing expectations of a Federal Reserve (Fed) interest rate cut at its December meeting. Attention will also be on the US November ISM Manufacturing Purchasing Managers Index (PMI) report, due later today.
Last week, UK Chancellor Rachel Reeves unveiled the Autumn Budget, detailing tax increases and adjustments to business rates, benefits, and pensions. Following this, the Office for Budget Responsibility (OBR) revised its 2025 growth forecast for the UK upward from 1.0% to 1.5%. However, the OBR simultaneously lowered its growth projections to 1.4% for 2026 and 1.5% for the subsequent four years. This 2025 UK Autumn Budget could potentially trigger a modest relief rally for the Pound Sterling (GBP) against the US Dollar (USD) in the near term.
Traders are increasing their wagers on a Fed rate reduction amid ongoing uncertainty and dovish remarks from Fed officials, which are weighing on the Greenback and acting as a headwind for the pair. According to the CME FedWatch tool, US Fed funds futures now imply an 87% chance of a 25 basis points (bps) rate cut at the Fed’s December policy meeting, a significant rise from 71% just a week prior.
Last week, Fed Governor Christopher Waller stated that current data suggests a sufficiently weak labor market to justify another quarter-point cut in December. Concurrently, San Francisco Fed President Mary Daly indicated her support for lowering interest rates next month, citing a sudden deterioration in the job market, which she views as more probable and challenging to manage than a resurgence in inflation.
