• The Pound Sterling remains vulnerable near 1.3060 against the US Dollar as investors expect the Fed to adopt a gradual rate-cut approach.
• Fed’s Williams expects that the central bank will not be in a rush to cut interest rates quickly.
• Investors await the US CPI and the UK GDP for fresh interest rate outlook.

The Pound Sterling (GBP) strives to gain ground near a three-week low of 1.3060 against the US Dollar (USD) on Tuesday. However, the near-term outlook of the GBP/USD pair remains fragile as the US Dollar clings to gains close to a fresh seven-week high, with the US Dollar Index (DXY) trading around 102.50. The Greenback strengthens as market participants are not pricing in another larger-than-usual 50 basis points (bps) interest rate cut from the Federal Reserve (Fed) in November.

The Fed started its policy-easing cycle with a 50 bps interest rate cut in September, majorly focusing on reviving labor market strength after gaining confidence that inflation will sustainably return to the bank’s target of 2%.

Market participants anticipated that the Fed would aggressively extend the rate-cut cycle. However, that speculation was wiped out by upbeat United States (US) Nonfarm Payrolls (NFP) data for September, which showed a robust increase in labor hiring, a lower Unemployment Rate, and an increase in wage growth.

Despite market speculation for Fed large rate cuts has waned, the central bank is expected to remain on course to ease monetary policy further. Meanwhile, the comments from New York Fed Bank President John Williams, in an interview with Financial Times on Tuesday, have indicated that he favors a 25 bps rate cut ahead and is in no hurry to reduce interest rates quickly as the latest employment data has increased his confidence in consumer spending and economic growth.