The GBP/USD pair trades with a mild defensive tone during Monday’s Asian session but shows limited downside momentum, holding comfortably above the key 200-day Simple Moving Average (SMA). Spot prices hover around the 1.3360 area, little changed on the day.
The US Dollar is attempting to extend last week’s modest rebound from a more than two-month low, acting as a near-term headwind for GBP/USD. A slight deterioration in global risk appetite, reflected in softer equity market sentiment, has provided some support to the safe-haven Greenback. However, USD bulls remain cautious, restrained by persistent dovish expectations surrounding the US Federal Reserve (Fed).
Despite the Fed’s relatively cautious messaging last week, markets continue to price in the possibility of two additional interest rate cuts next year, amid mounting evidence of a cooling US labor market. Moreover, speculation around the appointment of a Trump-aligned Fed chair is seen limiting the scope for a sustained US Dollar recovery, helping to cap downside pressure on the GBP/USD pair. Traders are also adopting a wait-and-see approach ahead of a packed economic calendar and key central bank risk.
In the UK, monthly employment data is due on Tuesday, followed by the delayed US Nonfarm Payrolls (NFP) report for October. Attention will then turn to UK inflation figures on Wednesday and the highly anticipated Bank of England (BoE) policy announcement on Thursday, both of which are expected to be pivotal drivers for the British Pound. Additionally, US consumer inflation data scheduled for Thursday could further shape the near-term direction of GBP/USD.
