The GBP/USD pair edged lower during early European trading on Wednesday, hovering near 1.3390 as the pound weakened against the US dollar. The decline reflects growing expectations that the Bank of England (BoE) could deliver another rate cut before the end of the year.
BoE rate cut expectations rise amid UK labor concerns
Dovish sentiment around the BoE has strengthened following fresh signs of labor market weakness in the United Kingdom. According to Reuters, UK businesses in the three months to September expect to keep employment levels steady over the next year — the first time since January that companies have shown reluctance to expand hiring.
Persistent inflation pressures, sluggish economic growth, and a softening job market are likely to weigh on the central bank’s policy decisions. So far, the BoE has maintained a “gradual and careful” approach to monetary easing, balancing the risks of high inflation with growing signs of economic slowdown.
USD outlook and upcoming catalysts
Meanwhile, the US dollar remains supported despite uncertainty over the ongoing US federal government shutdown, now in its second week after senators failed to reach an agreement on spending measures. A prolonged shutdown could eventually weigh on the dollar and offer limited support to GBP/USD.
Looking ahead, market focus will turn to comments from BoE Chief Economist Huw Pill, scheduled for later Wednesday, for insights into the UK’s policy outlook. In the US, traders will closely watch the release of the FOMC Minutes, alongside speeches from Fed officials including Alberto Musalem, Michael Barr, Austan Goolsbee, Lorie Logan, and Neel Kashkari.
