The GBP/USD currency pair continued to trade not far from recent 1-month low of 1.3011, as expectations that the Federal Reserve will likely reduce interest rates gradually after the 50 basis point cut in September kept the US Dollar supported.
“The rise in U.S. long-term yields, the consequent re-widening of interest rate differentials in favor of the dollar and forward rates no longer viewing the Fed as the bolder central bank in terms of easing are all keeping the [dollar] on bid,” UniCredit Research analysts wrote in an investor note.
Yesterday Fed Governor Christopher Waller called for “more caution” regarding future interest rate cuts.
According to Waller, recent hurricanes and a strike at Boeing would disrupt job market readings, paring monthly job gains by over 100,000 in October.
“Whatever happens in the near term, my baseline still calls for reducing the policy rate gradually over the next year,” Fed’s Waller was quoted as saying by Reuters.
Markets are now pricing in about an 89% chance of a 25 basis point rate cut at the Federal Reserve’s policy meeting in November.
At present, only 45 basis points of rate cuts are priced in by year-end.
Meanwhile, data showed on Tuesday that UK core wage growth had been the slowest since the three months to June 2022.
Regular pay, excluding bonuses, rose 4.9% year-on-year to GBP 648 per week in the three months to August, after a 5.1% surge in the prior period.
Average weekly earnings, including bonuses, rose 3.8% year-on-year to GBP 693 per week in the three months to August, or the slowest growth since the three months to November 2020.
The latest figures came in line with market consensus and will likely be welcomed by the Bank of England, as it considers its next interest rate cut.
The BoE left borrowing costs on hold at its September policy meeting, as it wanted to see further indications that inflation pressures were easing.
The official UK CPI inflation numbers for September are due to be released tomorrow.
The GBP/USD currency pair was last inching up 0.08% to trade at 1.3069.
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