GBP/USD rises above 1.3450 on rising odds of further Fed rate cuts

• GBP/USD gains ground as the US Dollar weakens due to the increasing likelihood of more Fed rate cuts in 2025.
• The CME FedWatch Tool indicates the pricing in a 97% chance of a Fed rate cut in October.
• The Pound Sterling gains ground as the UK economy rose in the second quarter.

GBP/USD extends its winning streak for the fourth successive session, trading around 1.3460 during the Asian hours on Wednesday. The pair may further appreciate as the US Dollar (USD) faces challenges after soft US jobs data increased the odds of Federal Reserve (Fed) rate cuts. The CME FedWatch Tool suggests that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and a 76% possibility of another reduction in December.

The recent US Job Openings showed the labor market is slowing, yet vacancies rose from 7.21 million to 7.23 million in August. Meanwhile, the hiring rate edged down to 3.2%, the lowest level since June 2024, while layoffs remained at a low level. Traders are likely to await the release of September's US ADP Employment Change and ISM Manufacturing PMI data, which could be affected due to the government shutdown.

The US government has shut down, with around 750,000 federal employees facing furloughs after Congress failed to pass funding bills. The US Labor Department said Monday that its statistics agency would suspend data releases, including Friday's closely watched monthly jobs report, if a partial shutdown occurs.

The GBP/USD pair gained ground as the Pound Sterling (GBP) received support after the stronger United Kingdom (UK) Gross Domestic Product (GDP) data for the second quarter was released on Tuesday. The figures showed that the UK economy rose by 1.4% YoY, faster than the preliminary release of 1.2%. Quarter-on-quarter GDP growth remained in line with flash estimates of 0.3%.

However, the British pound could come under pressure as Bank of England (BoE) Deputy Governor Dave Ramsden has advocated for a rate cut amid mounting concerns in the UK labor market. Ramsden also expressed confidence that inflationary pressures will ease, noting that current interest rates remain restrictive.