HG MARKETS:

The GBP/USD pair rebounded into the 1.3080s on Tuesday following a robust UK labor market report, providing support for the Pound Sterling (GBP). Earlier, the pair had weakened amid sustained US Dollar (USD) strength, driven by diminishing expectations that the US Federal Reserve (Fed) would need to aggressively cut interest rates.The US economy continues to perform better than anticipated, shifting sentiment away from concerns of a hard landing or recession. Investors are now considering the prospect of a “no-landing” scenario, where the economy remains resilient without the need for sharp rate cuts. This outlook bolsters expectations that US interest rates will remain elevated, attracting foreign capital inflows and increasing demand for the USD.

The Pound gained momentum after UK jobs data came in stronger than expected, reducing the likelihood of the Bank of England (BoE) cutting interest rates at its next meeting in November. The UK unemployment rate dropped to 4.0% in the three months to August, down from 4.1% in the previous period, and outperforming expectations. Employment figures also showed a notable increase, with 373,000 jobs added, compared to 265,000 in the prior three months. Wages rose in line with forecasts, though a rise in the September Claimant Count to 27.9K, above the expected 20.2K, caused some concern.

Looking ahead, key market events on Tuesday include speeches from Fed officials, such as San Francisco Fed President Mary Daly, Fed Governor Adriana Kugler, and Atlanta Fed President Raphael Bostic. On the data front, the NY Empire State Manufacturing Index is due, although it is not expected to significantly impact the USD.

On Wednesday, a series of UK data releases, including the Consumer Price Index (CPI) and Producer Price Index (PPI), will be in focus. These inflation metrics could influence the BoE’s decision-making, with September’s inflation data holding particular significance as officials weigh potential rate cuts in their November meeting.GBP/USD has seen a steady decline since peaking in the 1.3400s in late September, losing around four cents and settling back into the 1.3000s. Tuesday’s rebound marks a potential turning point as market participants look ahead to key inflation data and central bank commentary.