The Pound Sterling (GBP) remains under pressure near the 1.3400 level against the US Dollar (USD) in late European trading on Wednesday. The GBP/USD pair weakens as the Greenback outperforms its major peers, despite the ongoing U.S. government shutdown entering its second week.
At the time of writing, the U.S. Dollar Index (DXY) — which tracks the Dollar’s performance against six major currencies — is up 0.35%, hovering near 99.00, marking its highest level in two months.
The Dollar’s strength stems from renewed safe-haven demand following political shifts in Japan and France. In Japan, the ruling party’s election of Sanae Takaichi as its new leader — potentially the country’s first female Prime Minister — reduced expectations of further Bank of Japan (BoJ) rate hikes. Meanwhile, France faces heightened political turmoil after Prime Minister Sébastien Lecornu’s unexpected resignation, further boosting demand for the USD.
On the domestic front, the ongoing U.S. government shutdown poses a potential drag on the economy. President Donald Trump has warned of possible cutbacks to welfare programs and federal job layoffs, saying detailed plans would be announced within days, according to Reuters.
Market Movers: GBP Awaits BoE Commentary, USD Traders Eye FOMC Minutes
The Pound Sterling trades mixed on Wednesday — stronger against most major peers but weaker against North American currencies. Traders remain cautious amid uncertainty over whether the Bank of England (BoE) will deliver further rate cuts this year.
Inflation in the U.K. remains stubbornly high, even as labor demand weakens. In its September meeting, the BoE kept rates unchanged at 4% and maintained a “gradual and careful” approach to policy easing. Investors now turn their attention to a speech by BoE Chief Economist Huw Pill at 15:00 GMT. Pill was among the seven of nine Monetary Policy Committee (MPC) members who voted to hold rates steady.
Earlier today, minutes from the BoE’s Financial Policy Committee meeting suggested that U.K. households and businesses remain resilient despite high borrowing costs and elevated living expenses. The minutes also noted that risk managers are increasingly confident in the financial system’s stability during the second half of the year.
Focus on FOMC Minutes
Across the Atlantic, attention now shifts to the Federal Open Market Committee (FOMC) minutes from the September policy meeting, due at 18:00 GMT. The minutes will shed light on the reasoning behind the Federal Reserve’s decision to cut interest rates by 25 basis points to 4.00%-4.25% — its first rate reduction of the year.
The Fed’s dot plot indicates that policymakers expect the Federal Funds Rate to fall to 3.6% by year-end, signaling two additional rate cuts in 2025. The CME FedWatch Tool shows traders currently pricing in an 82% probability of two more 25-basis-point cuts before the year ends.
