GBP/USD recovered modestly in Asian trading on Thursday, climbing to around 1.3460 as the US Dollar (USD) eased against the Pound Sterling (GBP). Traders are positioning cautiously ahead of speeches from Federal Reserve (Fed) officials, as well as key US releases including the final Q2 GDP estimate, Durable Goods Orders, and weekly Initial Jobless Claims.
Fed outlook remains uncertain
Fed Chair Jerome Powell reiterated earlier this week that policymakers must balance persistent inflation pressures with a weakening labor market when considering future rate decisions. His cautious stance tempered expectations for aggressive easing.
San Francisco Fed President Mary Daly echoed the case for further rate reductions, highlighting the need to restore price stability and support employment. In contrast, Chicago Fed President Austan Goolsbee urged against committing to a series of cuts, reflecting divisions within the committee.
Markets are currently pricing in roughly 43 basis points of additional easing across the Fed’s final two meetings of the year, though policymakers have emphasized that the path forward will hinge on upcoming inflation and labor market data.
UK fundamentals remain fragile
The pound faces its own headwinds as UK fiscal concerns linger. Public sector net borrowing surged to £18 billion in August, the highest reading for that month in five years and well above consensus forecasts of £12.8 billion. Coupled with a string of weaker economic indicators, the data underscores risks to the UK’s growth outlook and could limit GBP/USD upside momentum.
