GBP/USD remains subdued around 1.3150 as UK Chancellor Reeves abandons tax rises

• GBP/USD struggles after UK Chancellor Rachel Reeves scrapped planned income-tax rises.
• The British Pound remains under pressure as softer economic data boost expectations of a December rate cut by the BoE.
• The US Dollar holds steady as markets await a wave of delayed US data after the government reopened.

GBP/USD remains subdued for the third successive session, trading around 1.3150 during the Asian hours on Tuesday. The pair struggles as the Pound Sterling (GBP) comes under strain after the United Kingdom (UK) Chancellor of the Exchequer Rachel Reeves abandoned planned income-tax rises. The decision has raised questions about the UK's fiscal outlook, despite the Office for Budget Responsibility lowering its budget deficit forecast to £20 billion from £35 billion. Reeves is still anticipated to pursue revenue through threshold changes and salary-sacrifice reforms, favoring a smaller-scale budget over significant tax increases.

Additionally, the British Pound continues to face downside pressure after softer economic data intensified bets on a December rate cut by the Bank of England (BoE). The UK economy delivered only marginal growth in Q3, with GDP declining monthly in September. This week, traders' attention will be on inflation figures, flash PMIs, and any indications of cooling momentum in the manufacturing and services sectors.

The US Dollar (USD) moves little as traders brace for a backlog of US data following the government's reopening. The Greenback gained support amid declining US Federal Reserve (Fed) rate cut bets for December. The CME FedWatch Tool suggests that financial markets are now pricing in a 43% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from 62% probability that markets priced a week ago.

However, Federal Reserve (Fed) Governor Christopher Waller said on Monday that the Fed should cut the interest rates when policymakers meet in December. Waller added that he's grown concerned over the labor market and the sharp slowdown in hiring, according to a news report by Bloomberg.