GBP/USD climbs as Bessent softens US stance, Powell's dovish tilt

• Bessent suggests longer pause on US tariffs in exchange for China easing rare-earth export limits.
• Powell highlights labor market weakness, saying policy should move toward "neutral" levels.
• UK's Bailey sees softening labor market; Autumn Budget to confirm tax hikes and spending cuts.

The Pound Sterling recovers some ground, advances 0.60% on Wednesday during the North American session as Sino-US tensions eased on comments of US Treasury Secretary Scott Bessent. The GBP/USD trades at 1.3396 after bouncing off daily lows of 1.3309.

Sterling climbs as Treasury Secretary hints at easing US-China trade tension; Fed Chair dovish language

On Wednesday, Bessent proposed a longer pause on high tariffs on Chinese products, in exchange of the recently tighten limits imposed by Beining on critical rare earths. "Is it possible that we could go to a longer roll in return? Perhaps. But all that's going to be negotiated in the coming weeks," he said in a press conference in Washington.

Dovish comments by Fed Chair Jerome Powell, weighed on the Dollar, which is posting losses according to the US Dollar Index (DXY). Powell acknowledged the weakness of the labor market, adding that the central bank should move to more "neutral" interest rates.

The ongoing US government shutdown could prompt a jump in the Unemployment Rate, amid expectation of mass federal layoffs. Meanwhile, traders will eye the release of the Fed Beige Book, which could be scrutinized, looking for hints about the status of the economy.

Across the pond, BoE Governor Bailey, crossed the wires after the release of a soft UK employment print and noted that the data support his view of a softening labor market.

GBP/USD traders' eyes are on the release of the Autumn Budget, by the Chancellor Rachel Reeves. She confirmed that tax rises and spending cuts are on the horizon, confirming expectations, given her pledges about balancing the country's books.

Analysts cited by Reuters revealed that the GBP/USD could "retreat to the 1.30 support before we maybe see some fiscal tightening that is more than the market is expecting."

GBP/USD Price Forecast: Remains bearish, despite advancing towards 1.34

The GBP/USD technical view suggests that the ongoing leg-up could be short lived unless buyers claim 1,3400 on a daily basis. This could pave the way for testing the 20-day SMA at 1.3424, ahead of challenging the 50-day SMA at 1.3474.

Despite this, momentum is bearish as depicted by the Relative Strength Index (RSI), which lies underneath the 50-neutral level.

Conversely, if GBP/USD extends its losses below October 14 swing low of 1.3248, further downside lies at the 200-day SMA at 1.3183.