The GBP/USD currency pair is maintaining its position above the 1.3300 level during the Asian session on Tuesday, drawing interest from buyers after a previous day of indecisive price action. The current strength of the pair is largely attributed to a dovish outlook from the Federal Reserve, which is undermining the US Dollar.
Despite this upward momentum, the British Pound faces challenges due to rising expectations of a rate cut from the Bank of England (BoE) this month. Traders appear to be adopting a cautious stance, preferring to wait for the upcoming Federal Open Market Committee (FOMC) rate decision scheduled for Wednesday.
The Fed is anticipated to announce a reduction in borrowing costs, a move that could further suppress the value of the US Dollar. This dovish sentiment has capped any significant recovery in the USD, which recently hit its lowest point since late October. Consequently, this environment is seen as supportive for the GBP/USD pairing.
Additionally, last week”s upgrade of the UK”s growth forecast by the Organisation for Economic Cooperation and Development has provided further backing for the British Pound. The OECD projected that the BoE would conclude its easing cycle by the second quarter of 2026, which has contributed to the current buying interest in GBP.
However, GBP bulls remain hesitant to make aggressive moves, particularly in light of the increasing speculation around an interest rate cut from the BoE next week. This sentiment has been reinforced by the latest UK inflation data, which indicated that the Consumer Price Index (CPI) fell to a year-over-year rate of 3.6% in October, down from 3.8% for the previous three months.
Given these factors, traders are likely to exercise caution and wait for stronger indicators before committing to further positions in GBP/USD. Market participants are also keenly anticipating US economic data releases, including the ADP Weekly Employment Change and JOLTS Job Openings, which are expected to provide additional insights later in the North American session.
