GBP/USD strengthens above 1.3430 as traders weigh impact of US government shutdown

• GBP/USD trades with mild gains near 1.3435 in Friday's Asian session. 
• US government shutdown impacts the US September employment report, which will be released on Friday.
• BoE's Breeden said keeping interest rates high for too long is risky. 

The GBP/USD pair posts modest gains around 1.3435 during the Asian trading hours on Friday. The US Dollar (USD) weakens against the Pound Sterling (GBP) as the US job market slows down and the government enters a shutdown. The US September Nonfarm Payrolls (NFP) report will not be published in light of the ongoing federal shutdown, while the ISM Services PMI, and the final S&P Global Services PMI should be released later on Friday. 

Signs of a weakening US job market support the case for more interest rate cuts by the Fed in the remainder of the year, which provides some support to the Greenback. According to the CME FedWatch tool, traders have almost fully priced in that the Fed will cut interest rates by 25 basis points (bps) to the 3.75%-4.00% range in the policy meeting later this month.

The shutdown is likely to extend into next week. Senate Democrats are expected to block a GOP-backed short-term funding bill again when they vote tomorrow, and the Senate is not expected to be in session this weekend. Concerns over the impact of the US government shutdown might also contribute to the USD's downside and act as a headwind for the major pair. 

Bank of England (BoE) Deputy Governor Sarah Breeden warned of higher for longer interest rate risks, saying that a recent rise in headline inflation was unlikely to last and there were risks to the economy if interest rates are kept high for too long. Earlier on Tuesday, BoE Deputy Governor Clare Lombardelli said that the UK central banks should be careful about assuming that inflation shocks are temporary. Mixed signals from BoE policymakers could undermine the Cable against the US Dollar.