The Pound Sterling (GBP) trades weaker near 1.3190 against the US Dollar (USD) during Tuesday’s European session, as the Greenback extends its recovery from Monday despite disappointing US ISM Manufacturing PMI figures for November.
At the time of writing, the US Dollar Index (DXY), which measures the USD’s performance against a basket of six major currencies, edges higher by 0.1% to around 99.50.
US economic data released on Monday confirmed that manufacturing activity contracted for the ninth consecutive month, with the downturn deeper than anticipated. The ISM Manufacturing PMI dropped to 48.2, below expectations of 48.6 and down from October’s 48.7. Other key sub-indexes, including New Orders and Employment, also registered sharp declines, highlighting deteriorating demand conditions—strengthening expectations for further Federal Reserve (Fed) rate cuts.
Market participants now widely expect the Fed to lower rates again this year. The central bank has already cut the Federal Funds Rate by 75 basis points to the 3.75%–4.00% range. According to the CME FedWatch Tool, there is an 87.2% probability of another 25 bps cut at the December policy meeting.
Daily Digest: GBP weakens amid dovish BoE outlook
The Pound remains slightly under pressure against major currencies after UK Prime Minister Keir Starmer reiterated the importance of reducing inflation and interest rates to support business investment and economic expansion.
Speaking to reporters on Monday, Starmer said, “The most important things we can do for growth and business are first to drive inflation down so that interest rates come down further, and the cost of business investment comes down with it,” as reported by Reuters.
His remarks followed the Autumn Budget announcement by Chancellor Rachel Reeves, who introduced tax increases worth £26 billion by 2029–30 to address the fiscal deficit. Expectations of softer UK interest rates continue to limit GBP’s upside potential.
Meanwhile, traders anticipate the Bank of England (BoE) will also cut interest rates this month, as labor market conditions weaken and inflation eases. However, BoE policymaker Megan Greene struck a more cautious tone on Monday, stating she would only support rate cuts if the job market and consumer spending show further deterioration.
What’s next for GBP/USD?
Key market catalysts for the GBP/USD pair will be Wednesday’s ADP Employment Change and ISM Services PMI data for November. The ADP report is projected to show private sector job gains of just 10K, far below October’s 42K. The ISM Services PMI is also expected to soften slightly to 52.1 from 52.4 previously.
