The GBP/USD pair is under modest pressure during Monday’s Asian session, trading around 1.3495, as a renewed wave of US Dollar (USD) demand weighs on the British Pound (GBP). However, expectations of a forthcoming Federal Reserve rate cut, spurred by dovish remarks from Fed Chair Jerome Powell, are likely to cap the downside for the cable pair in the near term.
Later in the day, attention will shift to the US New Home Sales and the Chicago Fed National Activity Index—both of which could influence intraday USD sentiment.
Fed Chair Powell Reinforces September Rate Cut Bets
In his keynote address at the Jackson Hole symposium on Friday, Powell signaled that the Fed may be poised to cut rates as early as the September meeting. While acknowledging that inflation risks remain tilted to the upside, Powell also noted that employment risks are building on the downside, citing a fragile labor market environment.
“The central bank is heading into a challenging situation,” Powell said, adding that the Fed could act before inflation fully returns to target, should job market conditions warrant it.
According to the CME FedWatch tool, market participants now assign an 85% probability to a 25-basis-point rate cut in September, significantly boosting expectations of a policy pivot. While such a move would typically weaken the USD, short-term demand for the Greenback amid risk-off sentiment and portfolio rebalancing continues to offer support.
UK Inflation Surprise Delays BoE Easing Path
On the UK side, recent hotter-than-expected inflation data for July has prompted markets to push back expectations for further Bank of England (BoE) rate cuts. Earlier this month, the BoE trimmed its benchmark rate from 4.25% to 4.00%, marking a return to what the central bank described as a “gradual and careful” easing cycle.
Despite this, the market is not fully pricing in another 25-basis-point cut until March 2026, reflecting uncertainty over the inflation outlook and domestic wage dynamics. The repricing in BoE expectations has provided a partial buffer for the Pound amid global USD strength.
With no high-impact UK economic data scheduled for this week, GBP/USD price action is likely to be dominated by US macro developments and Fed-related sentiment, especially as traders position ahead of this week’s key inflation and housing figures.
