GBP/USD Bounces Off One-Week Low as Market Remains Cautious
The British Pound (GBP) has begun to recover from its losses against the US Dollar (USD), but it's not yet clear if this trend will continue. The GBP/USD pair edged higher on Monday, reversing some of Friday's heavy losses and reaching a one-week trough. However, the gains are modest and lack conviction, with prices trading below 1.3500 during the Asian session.
The US Dollar, which had strengthened to a nearly two-week high last week due to month-end rebalancing, has paused its advance. This has provided some support for the GBP/USD pair. UK Chancellor John Healey's emphasis on maintaining fiscal discipline as the top priority for Prime Minister Andy Burnham's government ahead of the Autumn Budget on October 28 has also helped boost the pound.
Despite this, market bets for a Bank of England (BoE) rate hike have been pushed back to 2027 from late 2026. In contrast, US Federal Reserve (Fed) Chair Kevin Warsh's comments last week lifted expectations for a September rate hike. This, combined with the risk of escalating tensions between the US and Iran, may limit losses for the safe-haven USD.
This week's key focus will be on important US macro releases, including the US monthly jobs data, also known as the Nonfarm Payrolls (NFP) report, scheduled for Friday. The fundamental backdrop suggests that the path of least resistance for the USD is to the upside and warrants caution before placing bullish bets on the GBP/USD pair.