- GBP/USD declines to around 0.6520 in Wednesday’s Asian session.
- Fiscal worries weigh on the Pound Sterling.
- Growing conviction of a Fed rate cut might cap the downside for the pair.
The GBP/USD pair attracts some sellers near 0.6520 during the Asian trading hours on Wednesday. The Pound Sterling (GBP) weakens against the US Dollar (USD) amid concerns about the UK’s ability to keep its finances under control. The Bank of England (BoE) Sarah Breeden is set to speak later on Wednesday.
Britain’s 30-year borrowing costs rose to their highest levels since 1998, raising concerns about the Labour government’s ability to exercise fiscal constraint. With the budget unlikely to come until November, the UK faces weeks of speculation about tax increases, which might affect investment and consumer confidence. Fiscal worries and a gloomy economic outlook might exert some selling pressure on the Cable in the near term.
Nonetheless, a dovish tone from the US Federal Reserve (Fed) and expectations for a rate cut at the September Fed meeting might undermine the Greenback and help limit the major pair’s losses. Markets are pricing in a nearly 91% possibility of a 25 basis points (bps) cut at the Fed’s September 17 meeting, according to the CME FedWatch tool.
Traders will keep an eye on the US JOLTS Job Openings and the Fed Beige Book, which are due later on Wednesday. The attention will shift to the US August employment report on Friday. Economists estimated 75,000 jobs added in the US economy. This report will be closely watched as it precedes the Fed’s mid-September meeting. The surprisingly weak jobs report could encourage the US central bank to cut interest rates and weigh on the USD.
