HG MARKETS:

The GBP/USD currency pair moved slightly higher to around 1.3555 early Monday in Asia. Traders are focusing on the U.S. Federal Reserve’s meeting on Wednesday, where many expect the first interest rate cut of the year. A rate cut could weaken the U.S. Dollar and support the British Pound
Market expectations for a Fed rate cut are very strong, especially after signs of a weaker U.S. job market. According to the CME FedWatch tool, traders believe there’s nearly a 100% chance of a 0.25% rate cut. Some even think a bigger cut is possible, depending on the economic outlook.
The Fed has said that its decisions will depend on economic data. On Wednesday, the market will also watch the Summary of Economic Projections (SEP), which shows the Fed’s views on the economy and future interest rates. Any soft or “dovish” message could pull down the U.S. Dollar further.
Even with a weaker U.S. Dollar, the British Pound may struggle to rise too much. Recent UK GDP and factory output numbers for July were disappointing. This adds to worries about the UK economy and increases chances that the Bank of England may cut rates again this year.
Investors are now pricing in about a 33% chance that the Bank of England will lower interest rates once more before the year ends. These expectations could put downward pressure on the Pound, limiting its ability to gain against the U.S. Dollar.

Later on Monday, traders will watch the release of the New York Empire State Manufacturing Index for September. If the data shows continued weakness, it could further support bets for Fed rate cuts and weigh on the U.S. Dollar.

With both the Federal Reserve and the Bank of England expected to make key policy decisions soon, traders should brace for potential volatility in the GBP/USD pair. Any surprise moves—like a larger-than-expected rate cut or unexpected comments from central bank officials—could trigger sharp reactions in the market. Investors will closely watch central bank speeches, economic projections, and forward guidance. Currency markets often react quickly to shifts in tone or outlook. Therefore, even small changes in wording can impact sentiment. Until then, GBP/USD may trade in a tight range, with movements driven by incoming economic data. Traders are likely to remain cautious and adjust their positions based on developments throughout the week.