The GBP/USD pair trades positively around 1.3305 during the early European session, with the US Dollar weakening against the Pound due to expectations of a Federal Reserve interest rate cut. This anticipated rate cut, a third for the year, is expected to reduce the benchmark rate by 25 basis points to a range of 3.50%-3.75%.
The pair experienced a decline earlier, falling towards the midrange after failing to surpass the 1.3350 level, yet remaining above the 200-day Exponential Moving Average near 1.3250. Market focus is on the Federal Reserve’s upcoming interest rate decision, predicted with an 87% probability to induce a quarter-point reduction, amid ongoing inflation issues and preparations for new Fed leadership in 2026.
Impact Of Jobs Data
GBP/USD has weakened, sliding below the 200-day Simple Moving Average of 1.3331 and losing 0.21% on Tuesday. This dip followed the release of US jobs data, indicating a rise in job openings from 7.658 million to 7.67 million in October according to the Job Openings and Labor Turnover Survey (JOLTS). This data saw the GBP/USD pair drop below 1.3300.
With the Federal Reserve’s rate decision happening today, the expected 25 basis point cut is already factored into the GBP/USD price. We should therefore focus less on the cut itself and more on the forward guidance from Chair Powell’s press conference. His tone regarding the path of monetary policy into 2026 will be the primary driver of market movement.
The reaction will depend entirely on whether this is signaled as the last cut in the current cycle. If the Fed hints that the easing cycle is over, we could see a sharp rally in the US dollar, pushing GBP/USD back below the key 1.3250 support level. This would be similar to the dynamic we saw in late 2023, when the market’s aggressive bets on rate cuts were met with a more cautious stance from officials.
Potential Outcomes And Strategies
This rate cut is particularly notable given that the latest US Consumer Price Index (CPI) reading for October 2025 registered at 3.9%, still well above the Fed’s 2% target. The challenge of cutting rates amid persistent inflation creates uncertainty, which suggests volatility options on GBP/USD could be valuable. Traders might consider strategies that profit from a large price swing, regardless of the direction.
Later this week, our focus will shift to Friday’s UK monthly GDP report. The market consensus is forecasting a slight contraction of 0.1% for the month, reflecting the pattern of sluggish growth we have seen for most of 2025. A number weaker than this could undermine the pound’s recent strength and add pressure to the pair.
In the coming weeks, we will be watching the range between the recent resistance near 1.3350 and support around the 200-day moving average. A dovish Fed message combined with an unexpectedly positive UK GDP figure could provide the momentum to break higher. Conversely, a hawkish surprise from the Fed today would likely send the pair tumbling below 1.3300.
