The GBP/USD pair is trading positively at around 1.3305 in the early European session. The US Dollar is losing strength against the Pound, mainly due to expectations of a Federal Reserve interest rate cut. This would mark the third reduction this year, decreasing the benchmark rate by 25 basis points to a range between 3.50% and 3.75%. Earlier, the pair dropped after failing to break above the 1.3350 level but stayed above the 200-day Exponential Moving Average, which is near 1.3250. Investors are focusing on the Federal Reserve’s upcoming interest rate decision, which has an 87% probability of resulting in a quarter-point cut. This comes amidst ongoing inflation concerns and preparations for new Fed leadership in 2026.

Impact Of Jobs Data

The GBP/USD has weakened, dropping below the 200-day Simple Moving Average of 1.3331, down 0.21% on Tuesday. This decline followed the release of US jobs data, which showed an increase in job openings from 7.658 million to 7.67 million in October, according to the Job Openings and Labor Turnover Survey (JOLTS). This news pushed the GBP/USD pair below 1.3300. With the Fed’s rate decision happening today, the anticipated 25 basis point cut is already included in the GBP/USD price. Instead of focusing on the cut, we should pay attention to the forward guidance from Chair Powell’s press conference. His comments about monetary policy direction into 2026 will significantly impact market movement. The market’s reaction will depend on whether this cut is seen as the last in the current cycle. If the Fed suggests that the easing cycle has ended, we might witness a strong rally in the US dollar, pushing GBP/USD back below the important 1.3250 support level. This scenario mirrors what occurred in late 2023 when the market’s aggressive expectations for rate cuts met a more careful approach from officials.

Potential Outcomes And Strategies

This rate cut is significant, especially since the latest US Consumer Price Index (CPI) reading for October 2025 was 3.9%, still above the Fed’s 2% target. Cutting rates amidst ongoing inflation creates uncertainty, suggesting that volatility options on GBP/USD could be beneficial. Traders might explore strategies that profit from significant price movements, regardless of their direction. Later this week, we will turn our focus to Friday’s UK monthly GDP report. The market consensus predicts a slight contraction of 0.1% for the month, reflecting the sluggish growth seen throughout most of 2025. A figure weaker than this could weaken the Pound and add pressure to the pair. In the coming weeks, we will closely monitor the range between recent resistance near 1.3350 and support around the 200-day moving average. A dovish stance from the Fed combined with an unexpectedly strong UK GDP figure could provide the necessary momentum to rise higher. Conversely, a hawkish surprise from the Fed today could likely send the pair below 1.3300. Create your live VT Markets account and start trading now.

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