Pound Sterling weakens against US Dollar amid political jolts in Japan and France

• The Pound Sterling falls sharply to near 1.3440 against the US Dollar as the Greenback's safe-haven demand has increased.
• All eyes are on the speeches of several Fed officials as the bank is expected to cut interest rates two more times this year.
• Investors await BoE Pill's speech due Wednesday for fresh cues on the monetary policy outlook.

The Pound Sterling (GBP) declines 0.3% to near 1.3440 against the US Dollar (USD) during the European trading session on Tuesday. The GBP/USD pair slumps as the safe-haven demand of the US Dollar increases due to political jolts in Japan and France.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, gains 0.25% to near 98.35.

Broadly, firm Federal Reserve (Fed) dovish bets and ongoing US government shutdown are expected to keep a lid on the US Dollar's upside. Fed dovish bets have increased amid weakening labor market conditions, with consumer inflation expectations remaining anchored.

According to the CME FedWatch tool, traders see an 81.5% chance that the Fed will reduce borrowing rates in each of its two remaining monetary policy meetings this year.

For fresh cues on the central bank's outlook, investors await speeches from a slew of Fed officials: Atlanta Fed President Raphael Bostic, Fed Governors Michelle Bowman and Stephen Miran, and Minneapolis Fed President Neel Kashkari, all scheduled for this Tuesday during the North American session. Investors would like to know the current status of the US labour market due to the absence of key economic data releases amid the government shutdown.

Daily digest market movers: Pound Sterling underperforms on likely more BoE interest rate cuts this year

• The Pound Sterling underperforms its peers, except antipodeans, on Tuesday. The British currency faces selling pressure amid rising expectations that the Bank of England (BoE) could cut interest rates one more time in the remainder of the year.
• BoE dovish expectations have slightly increased amid growing United Kingdom (UK) labour market concerns. The latest BoE survey showed that businesses in the three months to September expected to keep employment steady over the next 12 months, the first time since January when they have been observed reluctant to increase staffing, Reuters reported.
• Slowing UK job demand is expected to allow BoE officials to turn dovish on interest rates in November's monetary policy meeting. Until now, the central bank has retained a "gradual and careful" monetary easing approach.
• The BoE has refrained from reducing interest rates aggressively as price pressures have remained well above the 2% target for a long period. However, the BoE stated in September's meeting that inflation would peak around 4% in the same month.
• For more cues on the UK's interest rate outlook, investors will focus on the speech from BoE Chief Economist Huw Pill, which is scheduled on Wednesday. Pill was one of seven Monetary Policy Committee (MPC) members who voted to keep interest rates on hold at 4% in September.

Technical Analysis: Pound Sterling falls to near 1.3440

The Pound Sterling slides to near 1.3440 against the US Dollar on Tuesday. The GBP/USD pair struggles to return above the 20-day Exponential Moving Average (EMA), which trades around 1.3475.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating a sideways trend.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the September 17 high of 1.3726 will act as a key barrier.