GBP/USD rises to near 1.3350 due to rising Fed rate cut bets

• GBP/USD advances as the US Dollar faces challenges on the dovish tone surrounding the Fed Policy outlook.
• Fed Chair Jerome Powell said that the central bank is on track to deliver another 25-basis-point rate cut in October.
• The Pound Sterling may lose ground as the cooling UK labor market boosted BoE's rate cut bets by year-end.

GBP/USD recovers its losses registered in the previous two successive sessions, trading around 1.3350 during the Asian hours on Wednesday. The pair appreciates as the US Dollar (USD) declines on the increased likelihood of further rate cuts by the Federal Reserve (Fed) in 2025. CME FedWatch Tool indicates that markets are now pricing in nearly a 94% chance of a Fed rate cut in October and a 93% possibility of another reduction in December.

The odds for further Fed rate cuts increased after the US Federal Reserve (Fed) Chair Jerome Powell stated on Tuesday that the central bank is on track to deliver another quarter-point interest-rate reduction later this month, even as a government shutdown significantly reduces its read on the economy. Powell highlighted the low pace of hiring and noted that it may weaken further.

Boston Fed President Susan Collins claimed that the policy is not on a preset path; there are scenarios that would keep rates steady, and that policy would remain restrictive even with more easing. Traders will likely observe speeches from Fed officials, including Stephen Miran, Christopher Waller, and Jeff Schmid, later in the day.

The upside of the GBP/USD pair could be limited as the Pound Sterling (GBP) may struggle due to signs of a cooling UK labor market, which has boosted expectations for more interest rate cuts by the Bank of England (BoE) in the remainder of the year. Traders expect the BoE to cut interest rates further by 46 basis points (bps) this year, according to Reuters.