GBP/USD rises above 1.3500 as BoE rate cut odds, US Dollar weaken

• GBP/USD receives support as the Pound Sterling rises amid fading odds of further BoE rate cuts.
• UK Chancellor of the Exchequer Rachel Reeves may boost revenues by introducing a windfall tax on commercial lenders.
• The US Dollar weakens as markets increase bets on a Federal Reserve rate cut in September.

GBP/USD appreciates after registering slight losses in the previous session, trading around 1.3530 during the European hour on Monday. The pair remains stronger as the Pound Sterling (GBP) receives support from the fading odds of further BoE rate cuts, driven by persistent inflationary pressures in the United Kingdom (UK). Catherine Mann, a member of the BoE Monetary Policy Committee (MPC), stated last week that the bank rate should be held persistently to lean against inflation risks.

The Pound Sterling holds gains following low-tier data from the United Kingdom. The non-seasonally adjusted UK Nationwide Housing Prices climbed 2.1% year-on-year in August, easing from a 2.4% gain in July. On a monthly basis, prices fell 0.1%, against an expected 0.2% increase and a 0.5% previous rise.

Nationwide's Chief Economist, Robert Gardne,r highlighted that house price growth remains subdued, citing stretched affordability as prices stay high relative to incomes and mortgage costs exceed three times their pre-pandemic levels.

UK Chancellor of the Exchequer Rachel Reeves could boost revenues by imposing a windfall tax on commercial lenders to recover the profits they are making from taxpayers on deposits held at the Bank of England (BoE), Bloomberg reported on Friday.

The GBP/USD pair gains ground as the US Dollar (USD) faces challenges due to rising odds of an interest rate cut by the US Federal Reserve (Fed) in the September meeting. Traders are now pricing in more than 87% of a 25 basis points (bps) rate cut by the Fed at the September policy meeting, up from an 84% chance a week ago, according to the CME FedWatch tool.

Traders are likely to await a slew of labor market releases this week that could shape the US Federal Reserve's (Fed) policy decision in September. Key reports include ADP Employment Change, Average Hourly Earnings, and Nonfarm Payrolls for August.