British Pound Recovers Slightly Amid Fed Rate Hike Uncertainty

The British Pound (GBP) has partially recovered from its earlier losses against the US Dollar (USD), but it remains down by 0.15%, trading near 1.3220 during Monday's European session. The GBP/USD pair saw a slight rebound as the US Dollar Index retreated from its fresh annual high of 102.53. This movement comes amid diminishing expectations of a hawkish Federal Reserve (Fed), following the softer-than-expected US Nonfarm Payrolls (NFP) data for September.

According to the CME FedWatch tool, the probability of a Fed interest rate hike this month has dropped to 19.4% from 70.9% a week ago. Kenneth Broux of Societe Generale noted that while the recent payrolls report has reduced near-term tightening expectations, inflation remains the Fed's primary concern. He emphasized that the Fed's hawkish stance is unlikely to change significantly, despite the softer job growth data.

Investors are now focusing on the US ISM Services Purchasing Managers’ Index (PMI) for September, scheduled for release at 14:00 GMT. The consensus expects the index to fall slightly to 55.0 from August's 55.4. On the GBP front, the upcoming UK budget later this month is a key event. Strategists at Rabobank suggest that taxes may be raised, which they view as unfavorable for both economic growth and public sentiment.

Technically, the GBP/USD pair is trading at 1.3225, maintaining a bearish near-term outlook as it remains below the 20-day exponential moving average (EMA) at 1.3326. The Relative Strength Index (14) at 34.9 indicates lingering downside pressure. Immediate resistance lies at the 20-day EMA, and until this level is surpassed, the pair is likely to face further consolidation or declines.