Pound Steadies as Softer U.S. Inflation Fuels Fed Rate-Cut Hopes

The British pound began the week with a modest rebound against the U.S. dollar, supported by renewed optimism over potential Federal Reserve rate cuts and improving global risk sentiment. The GBP/USD pair hovered near 1.3320, recovering slightly from last week’s pullback as traders reacted to the latest U.S. inflation figures.

Recent data showed that both headline and core U.S. Consumer Price Index readings rose 3% year-on-year—slightly below market expectations. The softer inflation reinforced speculation that the Federal Reserve may move forward with an interest rate cut, potentially as soon as this week. With limited U.S. data releases amid a government shutdown, the market focus shifted toward the broader macroeconomic picture and the upcoming high-profile meeting between U.S. and Chinese leaders in South Korea.

The improving tone around global trade relations lent further support to the pound, which typically benefits during periods of stronger risk appetite. Meanwhile, in the United Kingdom, slowing inflation has fueled expectations that the Bank of England could deliver its own rate cut in December. Market probabilities for such a move have climbed to around two-thirds, up sharply from last week’s levels.

Attention in the U.K. now turns to the government’s Autumn Budget announcement scheduled for late November, where investors anticipate new fiscal measures aimed at stabilizing public finances. Expectations are building that the Chancellor will raise substantial tax revenues to meet fiscal targets—moves that could influence the pound’s medium-term trajectory.

From a market perspective, the pound remains under mild downward pressure, though recent buying interest hints at a potential recovery if key resistance levels are cleared. A sustained move above the 1.3380–1.3400 region could open the door to further gains, while a slip below 1.3300 would expose the currency to renewed weakness near the 1.3220 area.

Overall, the week ahead appears pivotal for both sides of the GBP/USD pair. Investors are balancing expectations of coordinated easing from major central banks with the hope of progress in global trade talks—factors that could set the tone for currency markets heading into November.