GBP/USD weakens to near 1.3150 as US Senate reaches deal to extend government funding

• GBP/USD softens to around 1.3150 in Monday's early Asian session. 
• US Senate on Sunday moved toward a vote on reopening the federal government.
• The BoE left interest rates unchanged at 4%, with a 5-4 narrow majority vote.

The GBP/USD pair loses traction to near 1.3150, snapping the three-day losing streak during the early Asian session on Monday. The US Dollar (USD) strengthens against the Pound Sterling (GBP) amid positive signs that the record-breaking US government shutdown may end. Traders will keep an eye on the speech from the Bank of England (BoE) Clare Lombardelli later on Monday.

Bloomberg reported early Monday that the US government shutdown is nearing an end after a group of centrist Senate Democrats agreed to support a deal to reopen the government and fund some departments and agencies for the next year. 

The source said that federal employees would receive back pay and states would resume delayed federal transfers under the agreement. The measure would fund certain departments through January 30, while others would receive full-year appropriations. Hopes for ending the US government shutdown could provide some support to the US Dollar (USD) and create a headwind for the major pair. 

On the other hand, renewed US labor market concerns have resulted in a slight increase in investors' expectations, supporting more interest rate cuts by the Federal Reserve (Fed) this year. Markets are now pricing in nearly a 66% odds of a 25 basis points (bps) rate cut in December, according to the CME FedWatch tool.

The BoE decided to hold interest rates steady at 4.0% last week, citing caution ahead of the UK government's Autumn Budget in November. BoE Governor Andrew Bailey signaled that rate reductions are coming, with economists now pricing in a pre-Christmas rate cut. The UK central bank cautioned that future rate cuts "will therefore depend on the evolution of the outlook for inflation.