The British Pound (GBP) edged lower against the US Dollar (USD) on Monday, even as the ongoing US government shutdown entered another week and speculation grew around possible
Federal Reserve rate cuts.
Latest Exchange Rates:
- Pound to Dollar (GBP/USD): 1.3481 (+0.36%)
- Euro to Dollar (EUR/USD): 1.1712 (+0%)
- Dollar to Yen (USD/JPY): 150.15 (+0.38%)
Daily market recap
Despite mounting domestic challenges, the US Dollar managed to strengthen at the start of the week. The government shutdown continued, raising fears of potential job losses if lawmakers fail to reach a funding deal soon.
At the same time, expectations for Federal Reserve interest rate cuts have increased. According to the CME FedWatch Tool, markets are now pricing in a 95% chance of a rate cut in October and an 85% chance of another in December.
Normally, such dovish expectations would weaken the Dollar. However, the Greenback found support as both the Euro (EUR) and Japanese Yen (JPY) lost ground, driving investors toward the Dollar as a relative safe haven.
The Pound (GBP), meanwhile, traded unevenly throughout the day. With no major UK economic data releases, Sterling drifted as traders remained cautious. Risk sentiment was mixed, and many investors preferred to stay on the sidelines ahead of a speech by Bank of England (BoE) Governor Andrew Bailey later in the evening.
Bailey’s comments are expected to be closely analyzed for clues about the BoE’s stance on interest rates. Any suggestion that the central bank could keep rates higher for longer to tackle inflation might offer Sterling some support.
GBP/USD outlook: Fed speeches in focus
Looking ahead to Tuesday, the Pound-to-Dollar exchange rate will likely take its cues from a series of upcoming Federal Reserve speeches.
If Fed policymakers push back against the market’s aggressive rate-cut expectations and express confidence in the US economy, the Dollar could continue to strengthen. On the other hand, any dovish tones could cause the Greenback to lose momentum.
For the Pound, a quiet UK data calendar means GBP/USD will remain sensitive to global sentiment and Dollar-driven moves.
With attention fixed on the US government’s funding standoff and the tone of Fed commentary, traders should brace for continued volatility as the week unfolds.