British Pound Rebounds as US Dollar Strength Wanes on Fed Rate Hike Doubts

The British Pound (GBP) has partially recovered from its early losses against the US Dollar (USD) on Monday, though it remains down by 0.15% near 1.3220 during European trading. The slight rebound in GBP/USD comes as the US Dollar Index retreats from a fresh annual high of 102.53. This shift is likely due to diminished expectations of a Federal Reserve (Fed) interest rate hike later this month, with the probability dropping to 19.4% from 70.9% a week ago.

The GBP/USD pair opened the new week at 1.3237, with the pound capitalizing on opportunities to rebound from three-month lows. This movement follows a weaker-than-expected US labor market report, which showed only 29,000 jobs added in September compared to the anticipated 90,000. The weak data has reduced the likelihood of a Fed rate hike in October, shifting focus to a potential move in December.

However, the pair faces selling pressure as the USD gains strength due to increased safe-haven demand amid concerns over French fiscal policies. As of writing, the US Dollar Index trades 0.42% higher near 102.53, having hit a yearly high earlier in the day. Analysts note that the year-to-date low near 1.3140 could serve as a key support level for GBP/USD.